Internet retailer Amazon.com (NASDAQ: AMZN) is following Best Buy Inc.'s (NYSE: BBY) lead and is now supplying $50 gift certificates to those customers who purchased a now-obsolete HD DVD player on the e-tailer's website prior to February 23. Customers who bought an HD DVD player before that date have until April 9, 2009 to contact Amazon.com and claim their $50 credits (limit of 10).
It's good that Amazon.com is finally doing this -- but why did it take so long? The pioneering e-tailer didn't lead the charge on this one, and left that task to brick-and-mortar retailer Best Buy. Wal-Mart Stores, Inc. (NYSE: WMT) followed shortly behind and then a month later, Amazon.com joins the fray? Generally, Amazon.com is the leading trendsetter -- but not this time.
So, Amazon.com is giving previous HD DVD unit customers a $50 credit on anything else available for sale while pitching some great offers on the format winner Blu-ray format (always have to work an upsell in there). It would be great if every retailer who sold HD DVD players would follow along Best Buy's lead and provide $50 credits to customers as a future business retention tool, but that probably won't happen. The lack of that action, though, shows just who is in tune with customers and who could care less.
When Toshiba announced over a month ago that it would cease making and marketing HD DVD players, all the retailers that sold those types of players and associated movies in the HD DVD format had pretty much already announced that they'd started scaling down HD DVD inventory. To early adopter consumers who had already purchased expensive HD DVD players, this was the price of admission: not knowing whether that format or the competing Blu-ray format would win.
HD DVD eventually bit the dust, and for consumers who purchased HD DVD equipment at Best Buy, Inc. (NYSE: BBY), the taste was probably quite sour. As in, "what do I do with this $300 player now?" Following competitor Circuit City Stores, Inc. (NYSE: CC), Best Buy is now helping consumers with the frustration. Instead of giving customers a complete credit for the purchase of an HD DVD player like Circuit City is doing (if purchased in the last 90 days), Best Buy is doing something less interesting but with more oomph -- as in, free $50 gift cards.
This will cost Best Buy an estimated $10 million, and by many accounts it's worth every penny. The move has been classified as "brilliant" from just about every corner I can find. The reason? It will bring foot traffic into stores (that's half the battle of retail) while building loyalty to those consumers that HD DVD left in the cold. In other words "Best Buy cares," in a manner of speaking. And, no action is required; the cards will be mailed out proactively to those customers Best Buy has identified as having purchased an HD DVD player. Talk about a major marketing campaign here. And, from my perspective, this is actually better than just giving a full refund to customers who ask (ala, Circuit City). Again, it seems that Best Buy has an innovative angle here that should continue making it the first destination for consumer electronics purchases among the electronics early adopter crowd.
Toshiba Corp. (OTC: TOSBF) will take a beating after admitting defeat in the recent next-generation DVD wars and pulling out of HD DVD. Japan's largest chipmaker, as a result, sliced its full-year profit forecast by a staggering 31% this week to account for the HD DVD defeat as well as falling flash memory costs. It has its hands in both pots and both are going to kill a good chunk of profits this year.
In addition to writing down its HD DVD assets, the market for flash memory has already become brutal this year for Toshiba as well as for the competition like Samsung Electronics and Intel Corp. (NASDAQ: INTC). It's facing its first annual profit drop in over six years based on these two factors, as the company expects its flash memory prices to decline by 50% in its current fiscal year alone. Combine that will the wind-down of HD DVD (yes, there is still hardware inventory in stores), and Toshiba's in for a ride this year.
Let this be a lesson to the Japanese electronics giant: don't participate in risky format wars and minimize your exposure to a volatile market like flash memory (well, if you can). The ridiculous Blu-ray vs. HD DVD wars that existed for years finally came to an end this year, but now one of the parties will lose its shirt -- Toshiba. Sure, licensing revenue would have been great -- just ask Sony Corp. (NYSE: SNE) about this -- but you have to have a compelling reason to win. Toshiba apparently did not.
Now that the nation's largest retailer has dumped the HD DVD format, its creator, Toshiba, seems to finally have taken the hint and wants out of the HD DVD business. Wal-Mart Stores, Inc. (NYSE: WMT), which can make a merchandising decision and have an effect on an entire industry, has done just that within the next-generation optical disc format that will replace the standard DVD someday.
Time Warner announced earlier this year that it would back out of the HD DVD format soon, Best Buy, Inc. (NYSE: BBY) indicated that it would slowly stop selling HD DVD as well, and now the final death knell -- Wal-Mart. So, by the end of 2008 (if not before), consumers will finally have one high-definition optical format to choose from and the industry can rally behind it and finally put a worthless format war to rest. Unlike the VHS-Betamax war of the 1980s, Sony Corp. (NYSE: SNE) wins this one since it is the primary technical backer of the Blu-ray format..
So, there you have it -- one format finally emerges the victor. Will the triumph of Blu-ray finally mean increasing fortunes of consumer electronics manufacturers now that a single format can be marketed to consumers? How about Sony, which can now trumpet the Blu-ray capability of its money-losing PlLayStation 3 game console and try to make up for lost opportunities in the gaming market? The good news is that the consumer electronics camp can now price and market Blu-ray as the successor to DVD, lower disc prices and player prices, and urge a whole new generation of purchasers to 'upgrade' to another format yet again. Expect another format sometime in 2018, perhaps called Red-beam or something like that -- and the process will repeat all over again. That is, unless downloads haven't toasted much of the physical media market by then.
The HD vs Blu-Ray wars are still going. But as Brian Whitepoints out, they're already losers because downloads and online rentals are about to change the field.
When Time Warner, Inc. (NYSE: TWX)'s Warner Bros. abruptly dropped support for the HD DVD high-definition disc format this past weekend to focus solely on format competitor Blu-ray, HD DVD primary backer Toshiba Corp. (OTC: TOSBF) began to get really nervous. After all, this ridiculous next-generation format war (like the VHS vs. Betamax wars of the 1980s) was keeping many customers from buying a newer, high-definition DVD player for fear of buying something that would soon become obsolete.
Sony Corp. (NYSE: SNE), on the other hand, was probably cheering in all its executive offices. Sony, who has more Blu-ray-capable DVD players sold than any other company in the form of PlayStation 3 game consoles, has been Toshiba's mortal enemy in the race to win the single-format, high-definition DVD war that started raging in 2007.
Investors liked the Warner Bros. announcement also, and Sony saw its shares edging higher this morning (up almost 3%). With Time Warner on board, 70% of all major films will now see DVD releases on the Blu-ray format. Some have even gone so far to say that HD DVD is now dead, even as it just started growing. Consumers will win with one standard, but some companies -- like Toshiba and Microsoft Corp. (NASDAQ: MSFT) -- will stand to lose at least a piece of their collective shirts. That's a format war for you.
When Wal-Mart Stores, Inc. (NYSE: WMT) decided to release a best-in-class lower price on a HD DVD player last week, fans of the newer high-definition DVD format probably cheered. Standard DVD has been good to most consumers due to cost and amount of titles available, but then again, a $199 price on a relatively new format does in fact start reaching the point when mass adoption form many customers starts to begin.
But then, something interesting happened. A few days later, Wal-Mart dropped the price on this HD DVD player again, landing the new price at $97. Now that's huge, and it was perfectly timed for the holiday shopping season which is already here if you haven't realized. Several retailers followed in lockstep to Wal-Mart's pricing on HD DVD players, with both Best Buy, Inc. (NYSE: BBY) and Amazon.com, Inc. (NASDAQ: AMZN) lowering their prices to match Wal-Mart's price. I wondered if Best Buy could afford to do this. Although they did stand by that lowered price, the company apparently ran out of stock on this older-model HD DVD player that sold for under $100. Plan B for Best Buy was to sell a brand new model for the same price. There's the wrinkle.
The older Toshiba HD DVD model that saw all these price drops was replaced by Best Buy with a brand new Toshiba model that normally would retail for $299.99. Best Buy, having exhausted its supply on the older product due to the sub-$100 price, was in a spot of trouble, since that older model was discontinued and there would have been no way for the retailer to fulfill backorders. But, replacing the HD DVD in question with a brand new unit retailing for three times as much is a little risky (Best Buy has to be losing money on these newer units). But, it had no choice when following Wal-Mart into the competitive land of extreme low prices.
If you're not up on the ongoing face-off between Blu-ray and HD DVD, here's a quick synopsis on what is becoming the latest technology battle since that long ago technology struggle between VHS and Betamax:
Blu-ray and HD DVD are two next-generation DVD formats fighting to win over consumers. Electronics giant Sony Corporation (NYSE: SNE) developed the Blu-ray format, and is using its Playstation 3 video game console to showcase it. Others supporting Blu-ray include Apple Inc (NASDAQ: AAPL) and Hewlett Packard Company (NYSE: HPQ). HD DVD was developed by the DVD Forum, and is being championed by Microsoft Corporation (NASDAQ: MSFT), Toshiba Corporation (OTC: TOSBF) and Intel Corporation (NASDAQ: INTC), among others. The main difference between the two is that the Blu-ray format can hold more data, while the HD DVD format is less expensive.
The rage in consumer electronics these days -- past the flat-panel TV -- is the next-generation DVD player. Of course, there are two incompatible formats vying for the customer's attention (and wallet or purse). Those two formats, Blu-Ray and HD-DVD, have been seen mostly at premium prices thus far, with players recently selling for as high as $999 and $599. In fact, some folks reported buying Sony's PlayStation 3 gaming console specifically to use the Blu-Ray next-generation DVD player inside. The PS3 was actually the cheapest way to get a Blu-Ray player.
Enter Wal-Mart (NYSE: WMT). The retailer that loves to set the bar low enough on prices to squeeze out as many competitors as possible is reportedly going to introduce a $299 HD-DVD player after sending quite a pinch of its money to a Chinese supplier to get to that price point at retail. The deal for two million HD-DVD players with China's Great Wall Corporation will bring the next-generation DVD player down to the level where it may start selling. Right now, most consumers are content with regular DVD and see no reason to lay down a grand for what can be perceived as a minor step forward in picture quality (it really isn't, but that's the perception).
In a retailer where you can find disposable $29 DVD players now, will Wal-Mart lead the charge to commoditize the HD-DVD format this early in its lifetime? Surely -- it does this all the time with certain products in the consumer electronics category, bringing other retailers with it in the process. Circuit City (NYSE: CC) and Best Buy (NYSE: BBY), for example, have to match the pricing on those flat-panel TVs Wal-Mart sells or possibly lose sales. That's the Wal-Mart effect at work. These new HD-DVD players are expected sometime in late 2007 or early 2008. Other consumer electronics retailers, watch out.
On the technology curve the leading edge is dedicated to the 'early adopters' who buy the latest gadget no matter what the cost is. These people are pretty useful because they act as an early 'heads up' group. They filter through upcoming technology and give us a hint as to what is a useful device or not. The early PDA users suffered through awkward hand-writing technology, and early computer users pushed through text-based prompts for the rest of us. A look at which companies are adopting them though, and the risk therein, can be useful for investing purposes.
Smart Money recently published a list of five gadgets not to buy and gave its reasons for consumers to avoid it. Of the five, Sony Corporation (ADR) (NYSE:SNE) and Microsoft Corporation (NASDAQ:MSFT) got dinged pretty hard by the article due to products of their own and their close relationship to others.
The Blu-Ray vs HD-DVD war over the next standard for Hi-Definition Media is already underway, with many swings for and against each camp.
Most consumers would probably choose to wait until the standards war (much like Betamax vs VHS) is over so that there will be no wasted money on players for the standard that loses.
Major players in Media and Hi-Tech however do not have that luxury. Hi Definiton TV programming is already available and prevalent on most cable/satellite systems. Hi-Definition Display adoption has been booming as most Plasma, LCD, and Projection TVs are now HD compatible (able to display Hi-Definition Resolutions).
With HD Content and HD Displays already on the market, companies must provide their customers with the means to fully embrace the new content or potentially lose their customers to competitors who have chosen a camp (Blu-Ray or HD-DVD) and are offering HD products/services.
Apple has been on the board of directors for the Blu-Ray standard since March 10, 2005, but as of yet has not incorporated Blu-Ray into any of its new products.
As if you hadn't heard enough about hybrids lately -- the Toyota Prius, for instance, or the tomato
genetically modified with salmon DNA -- now Warner Home Video decides to drop a hybrid DVD on us.
That right, a hybrid DVD. What that means is that on one side, it's a standard DVD while on the other side,
it's a high-definition DVD (those in the know will refer to it as "HD DVD." That's just FYI). On
May 9, Warner Home Video will roll out the the company's very first hybrid DVD -- the Jennifer Aniston vehicle
Rumor Has It -- at $39.99.
Clearly, this news raises some pretty important questions:
will owning a hybrid DVD will allow you to be as smugly self-righteous as owning a hybrid car?
will Vince Vaughn, Jennifer Aniston's beau, get insecure because Dodgeball is only available in standard DVD format?
Internet retailer Amazon.com (NASDAQ: AMZN) is following Best Buy Inc.'s (NYSE: BBY) lead and is now supplying $50 gift certificates to those customers who purchased a now-obsolete HD DVD player on the e-tailer's website prior to February 23. Customers who bought an HD DVD player before that date have until April 9, 2009 to contact Amazon.com and claim their $50 credits (limit of 10).
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Now that the nation's largest retailer has 
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The rage in consumer electronics these days -- past the flat-panel TV -- is the next-generation DVD player. Of course, there are two incompatible formats vying for the customer's attention (and wallet or purse). Those two formats, Blu-Ray and HD-DVD, have been seen mostly at premium prices thus far, with players recently selling for as high as $999 and $599. In fact, some folks reported buying Sony's PlayStation 3 gaming console specifically to use the Blu-Ray next-generation DVD player inside. The PS3 was actually the cheapest way to get a Blu-Ray player.
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