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Paul Sweeting

Paul Sweeting is the editor of ContentAgenda.com and a columnist for Video Business. He has covered the home entertainment industries since 1985 for Billboard, Variety, Publishers Weekly and other leading business publications. He is based in Washington, DC.


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Paul Sweeting

Paul Sweeting, Media Wonk
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Why Toshiba quit - February 19, 2008

In the end, I think Sony just wanted it more. Having tied  its two most important strategic initiatives together--like a kid tying his own shoelaces together--by insisting on a Blu-ray drive in every PlayStation 3 console, failure by Blu-ray wasn't just not an option for Sony, it wasn't even worth contemplating because it would have sunk the company. Had Blu-ray lost out to HD DVD in the high-def movie market it would have left PS3 marooned with a drive format that was obsolete for movies and unnecessary and expensive for games, not to mention unwanted by most gamers and third-party game developers. Instead of "merely" another format loss in consumer electronics, it would have crippled a PlayStation division that, as recently as three years ago, generated 70% of Sony's total profits.

In fact, given the damage Blu-ray has already inflicted on PS3 (third place in a three horse field) it's not clear that winning the format war over HD DVD will be enough at this point to salvage the whole Catdog strategy. At a minimum, Sony has blown the chance to achieve the sort of dominant market share it had in previous generation of game consoles.

But what must have been clear to Toshiba--if not at the beginning then in the end--is that the stakes for Sony were such that there really wasn't any cost it wouldn't pay to win the high-def DVD format war. There's nothing Toshiba or its allies could have done to make fighting on too costly for Sony. Ordinary competitive considerations simply didn't apply.

In contrast with Sony, losing the high-def format war, while bitter, hardly poses an existential threat to Toshiba. Though it has a large footprint in consumer electronics, most of its profits come from its semi-conductor business. It also has a substantial business in making turbines for nuclear power plants. Although Toshiba will now have to take a significant restructuring charge, the Financial Times estimates that cutting its losses now will add 40-50 billion yen to operating profits next year ($370-$450 million), which is why it shares jumped 5% on news that it was pulling out.

In the end, Toshiba didn't have to win and Sony did.
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Robert Smith
February 19, 2008
Response to:
Why Toshiba quit

From a consumer perspective, Sony tried to create two revolutionary things: a distinctly better HD format (albeit a stretch) and a grand vision of a media console. These products are not the typical play-it-safe designs. Whether the consumer will ultimately notice this and reward them, who can say?




Al
February 19, 2008
Response to:
Why Toshiba quit

Sony won despite itself. WB & Disney did the heavy lifting on this one.




Jordahn
February 20, 2008
Response to:
Why Toshiba quit

Last time I checked, SONY made a net profit AFTER the loss they took from their gaming division. With that being said, they didn't have to win the "format war" or the "console war." If either or both "failed" it would have been a lost investment that would have been easily absorbed by SONY's other divisions. Besides, whats' wrong with being in third place in the "console wars" as long at your product is still a viable option. Both the Gamecube and original Xbox did fine behind the PS2 of last generation, so the PS3 will be fine as well since it's nowhere near behind the Wii and Xbox 360. Besides, PS3 sales have been picking up since the beginning of November 2007 BEFORE a clear winner of the "format wars." Ummm... And how much money did Toshiba lost in this "format war???"




dobyblue
February 20, 2008
Response to:
Why Toshiba quit

Wow - the incredibly dumb articles are surfacing all over the place. Honestly, it would great if people would think for a second. Sony had to win? The company would fold if Blu-ray didn't succeed? I guess they'd suddenly fold all their phone, television and Columbia/Tri-Star pictures businesses would they? Stop making camcorders? In case someone forgot their calculator this morning, market share for the PlayStation 3 over the last 6 months has gone from 17% to over 20%. You obviously have no clue how much other companies like Pioneer and Panasonic had invested in Blu-ray.




a
February 20, 2008
Response to:
Why Toshiba quit

SONY isn't BDA. Every other point you have is worthless if you can't even understand that much.