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Toshiba Quits HD Format War, Blu-ray The Winner

By David Richards | Sunday | 17/02/2008

Toshiba is set to announce that they are pulling out of the HD DVD business after Warner Bros and US retailers Wal-Mart, K Mart and Best Buy said that they are only going to support Blu-ray. Also contributing to the decision was a move by retailers globally to support Blu-ray over HD DVD.

The news leaked by Toshiba insiders and Hollywood movie studios who have supported HD DVD was expected with Toshiba now considering what to do with the technology.

Now Toshiba is reviewing whether to completely end HD DVD production or keep it for niche industries.

Keisuke Ohmori, a spokesman for Tokyo-based Toshiba, said the company's considering "various possibilities'' over its HD DVD business and said that announcements were due soon. He declined to comment further.

Sony will probably benefit as its Blu-ray format is likely to become the dominant high-definition DVD standard after Toshiba's exit from the business, according to the report.

Time Warner Inc.'s Warner Bros, the world's largest publisher of DVD titles, said in January that it would stop releasing movies in the HD DVD standard. Wal-Mart, the world's largest retailer, said yesterday it will phase out sales of HD DVD players and only offer products based on the Blu-ray format.

Another problem for Toshiba was that retailers and their staff prefered to sell Blu-ray. J.D. Power and Associates mystery shopper study has found that retail salespeople across the world are strongly recommending Blu-ray Disc players over HD DVD to their customers.

Chris Denove, J.D. Power and Associates VP, said that less than 1-in-10 retail salespeople recommended HD DVD to survey takers posing as shoppers for the syndicated, independent field study.

The HD disc study covered electronics salespeople in over 200 retailers in January. Mystery shoppers posed as people who had just purchased an HDTV and were looking for a nameless dedicated HD disc player.

The survey found 25 percent of all salespeople chose not to recommend one platform over the other. But of those who did, 89 percent recommended Blu-ray, and most of them "very strongly recommended Blu-ray, to the point that a typical customer would have had to think long and hard before buying HD DVD in the face of what salespeople are telling them about the two platforms," Denove said.

"Best Buy just issued a press release saying it's going to recommend Blu-ray. But, our data shows that they've been recommending Blu-ray all along, in fact, more so than the national average," Denove said "In fact, in January, we didn't come across a single Best Buy salesperson recommending HD DVD."

Denove said that typically CE retail sales people were quick to point out to their customers that there was a technology war similar to what occurred back when VHS battled Beta.

"Without even being asked about the battle for DVD supremacy, half the salespeople told our shoppers that there was a battle going on and Blu-ray either was already the winner (or would become the dominant player in the end)," he said.

"About a third of all salespeople said our shoppers should choose Blu-ray because of the strength of the companies behind Blu-ray," Denove said.

Only one retailer  had salespeople that were split approximately 50/50 in steering shoppers toward Blu-ray and HD DVD to customers, Denove said.

The study did not bring up gaming consoles with HD DVD or Blu-ray playback ability, but gaming devices were factored into the study if suggested as a consideration by the salesperson.

Denove said that some retail chains - Best Buy in particular - had salespeople that seemed to be more focused on cross selling, where they were more likely to tie in the TV elements of the disc formats with computers or gaming.

In light of recent developments with Warner Bros. endorsing Blu-ray exclusively, "we had expected that salespeople would focus on the title wars in making their recommendation," Denove said. "Many did, just not quite as focused on titles as we expected. Overall, a little more than a third talked about Blu-ray either having more titles now, or would end up having more titles in the future."

According to the study, the only advantage of HD DVD mentioned by more than a few salespeople was price.

"Out of nearly 200 mystery shopping experiences, not one salesperson suggested that HD DVD would become the dominant format," Denove said.

Denove said the survey indicated that the sales push toward Blu-ray "was not related to technical features, instead the focus of most pitches were on the following: 1) there is a format war going on and most salespeople felt that Blu-ray had already won the war or would be the eventual winner of the war; 2) the companies backing Blu-ray are the stronger players, with Sony mentioned most prominently; 3) Blu-ray had the strongest studio support and title selection.

The study concluded that if a change in direction is possible at this stage, the companies supporting HD DVD must do one of the following: either do something to create demand from the consumer up front, so that the consumer is going into the store looking specifically for HD DVD, or do something to sway the overwhelming recommendations of sales people, such as introduce or boost spiff programs or some similar incentive, Denove said.

As for Toshiba's recent promotional price cuts on HD DVD players, Denove said: salespeople are pushing so heavily in the favor of Blu-ray that only a small percentage of them are even talking about the price advantage of HD DVD, and right now that's the only thing they seem to want to rally around."

Even dual-format players failed to leave significant measurements, Denove said.

"Given that our shoppers were trying to decide between Blu-ray and HD DVD, we were surprised that only 7 percent of all salespeople even offered up the option of a combo player so that our shoppers didn't risk choosing the wrong format. This likely reflects the fact that salespeople seem fairly confident that Blu-ray will win out in the end."

Denove said the trend suggests that "combo players need to create demand upstream in the decision process to get traction, because salespeople sure aren't doing anything to drive demand out on the showroom floor."

By brand, salespeople focused almost exclusively on Sony for Blu-ray (Sharp and Samsung came in a distant second and third, respectively), J.D. Power & Associates said. Not surprisingly, of those recommending HD DVD, Toshiba was almost always the recommended brand, said Denove.  

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