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2/19/2008
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Toshiba Gives Up On HD DVD, Ends High-Def Format War

Toshiba plans to stop shipping HD DVD players and recorders by the end of March, and end production of disk drives for PCs and videogames in the same timeframe.

Toshiba on Tuesday surrendered in the high-definition format war against Sony-backed Blu-ray, saying it would no longer make or market HD DVD players and recorders.

The announcement came four days after Wal-Mart Stores, the world's largest retailer, said it would stop selling HD DVD movies and players by June. But the turning point in the format battle came last month when Warner Bros. Home Entertainment Group, which accounts for 20% of DVD sales in the U.S., said it would ship all of its high-definition titles in Blu-ray by year's end. Consumer electronics retailer Best Buy and online movie renter Netflix followed suit this month.

Toshiba said that it would continue to provide full product support and after-sales service to customers of Toshiba HD DVD products. The company had sold 1 million players and recorders worldwide, including sales for drives for Microsoft's Xbox 360.

In reassessing its support for HD DVD, Toshiba said it came to the conclusion that the market for high-definition movies and hardware would be better served by having one format. "While we are disappointed for the company and more importantly, for the consumer, the real mass market opportunity for high definition content remains untapped and Toshiba is both able and determined to use our talent, technology, and intellectual property to make digital convergence a reality," Atsutoshi Nishida, president and chief executive of Toshiba, said in a statement.

Toshiba had pushed hard for HD DVD adoption as part of a strategy to become a bigger player in the consumer electronics market. The Japanese company is the world's second largest NAND flash memory maker, and is also a big supplier of nuclear power turbines, elevators, and washing machines.

In the last business year, Toshiba's Regza TVs, Dynabook notebooks, and Gigabeat audio player and other digital products for consumers comprised 40% of the sales of the company's electronics group, but only earned 6% of Toshiba's profits, according to Reuters news agency.

Toshiba planned to stop shipping HD DVD players and recorders to retailers by the end of March, and end production of disk drives for PCs and videogames in the same timeframe. The company did not say whether it would switch over to making Blu-ray products. The plans would have no impact on Toshiba's standard DVD business, the company said.

Toshiba intended to continue working on other products with its HD DVD partners, including Hollywood studios Universal Studios, Paramount Pictures and DreamWorks Animation. On the technology side, the company planned to continue working with Microsoft, Intel, and Hewlett-Packard.

By dropping HD DVD, Toshiba during the current business year would likely save $450 million in sales and promotion and in restructuring its HD DVD business, analysts told Reuters. The company was expected to lose $93 million in unloading excess inventory and scrapping assembly lines.

Those companies that dropped support for the Toshiba-backed format said it was necessary to eliminate customer confusion over having to choose between two competing and incompatible technologies. Most consumers have shunned high-definition DVDs and players to avoid being on the losing end of the format war, which was reminiscent of the battle between Betamax and VHS in the early days of videocassette recorders. VHS eventually won over Sony-backed Betamax.

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