VodkaPundit

HD-DVD Swings For The Fences

The two-year-old format war between Blu-Ray (Sony) and HD-DVD (Toshiba, Microsoft, and many other partners) got very interesting today. In a “secret” sale (which was widely known about online), Wal-Mart put Toshiba’s HD-A2 HD-DVD player up for $98.87 plus tax at 8AM on Friday.

That’s a big deal.

When standard DVD players first came out a decade ago, their prices weighed in at around $1,000 each, as did the original compact disc players a decade or so before that. At those prices, only hard-core enthusiasts and dedicated first adopters would even think about buying in. It took a few years for mass production and growing acceptance among customers to drive prices down to normal-human levels–call it the $100 barrier–but once they did, the CD and DVD both quickly became the de facto standard for audio and video, resulting in billions of dollars in sales for both hardware and software.

The high-definition video disc world has been held up not only by price–true to form, the first players were all at or right around four figures–but also by a self-destructive format war. Sony, having failed time and again to corner format markets with flops like Betamax and MiniDisc (please, no emails on how either was a great product–they may have been, but they still failed), is trying mightily to own the next generation of video with their Blu-Ray, and thought they’d get there by including a Blu-Ray player in every Playstation 3. The problem is, the PS3 is so expensive, it hasn’t become the ubiquitous device Sony had hoped for. Blu-Ray is by all accounts a great technology, with more capacity than HD-DVD, and Sony’s stand-alone Blu-Ray players have been getting pretty good reviews– but they’re still around $500 each.

The HD-DVD side has been concentrating on price, and they’re taking a huge swing for the fences with today’s sale. It’s a gigantic risk financially. Either Toshiba or Wal-Mart or both are absorbing a very substantial loss by selling these units for $98 (I’d guess just Toshiba, Wal-Mart is too smart to take a hit this big). The HD-DVD drive inside the HD-A2 all by itself is worth more than $98, even without all the associated technology and packaging.

So why are they doing it? To capture the market. I heard people saying it in line this morning: “Hey, for $100, if Blu-Ray winds up winning, so what? This one’s almost disposable.” That argument certainly worked on me; after years of dissing both formats (or more specifically the format war itself), I was up early and at my local ‘Mart my own self.

They sold about 25 of them before running out; Wal-Mart’s sticker price on the player is $198, and many were obviously bound for eBay. That’s not so many in the big picture, but there are lots and lots and lots of Wal-Marts out there. Twenty-five times lots and lots means HD-DVD gets a nice big stake in the ground this fall, and Sony’s going to have to do something to answer, or they’ll be stuck with Son Of Beta.

Big risks. Small prices. Awesome picture. Ain’t capitalism great?

UPDATE: Per Gizmodo, BestBuy is matching Wal-Mart’s $99 price for the Toshiba HD-A2. Now it’s on.