Blu-Ray and HD DVD: Betamax - VHS 'Format Wars' Redux?

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Case Details:

Case Code : BSTR230
Case Length : 21 Pages
Period : 1975-2006
Organization : Sony Corp.
Pub Date : 2006
Teaching Note : Available
Countries : USA
Industry : Electricals and Electronics

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...But Does Sony Loose?

Although the VHS format was the clear winner in the Betamax-VHS format war, it was a debatable issue whether Sony was the 'loser'. The competition between the two standards lasted a little over a decade and during that period Sony had sold several million Betamax VCRs. When the company finally started producing VHS video recorders in 1988, these sold well in Japan as well as in other countries. Masaaki Morita (Masaaki), then deputy president, Sony, said, "Speaking frankly, we didn't want to manufacture VHS. However, you don't conduct business according to your feelings. Let's look at reality. The demand is getting stronger in the marketplace for Sony-made VHS products"...

The Intervening Years

In the late 1980s, Sony along with Philips, Matsushita, and JVC developed and released a compact disc (CD) that could store video - both still and motion - in addition to audio. These discs were called Video CDs (VCD).

Although VCDs were not popular in the more sophisticated western markets due to poor video quality and lack of support from the entertainment industry, they became popular in Asia because of their low prices.

The VCD was, in a way, a precursor to the DVD. In the early 1990s, two separate groups started work on developing a new high-density optical storage standard...

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Sony and the Blu-Ray

The non-adoption of its MMCD format was a significant blow for Sony. "It was an enormous loss of face and had very significant commercial consequences for Sony," said Warren Lieberfarb, former Warner Home Video president often called the father of the DVD, who was a consultant to Toshiba and a leading advocate of HD DVD. The rapid acceptance of the DVD technology benefited Toshiba and the supporters of SDD more than Sony. Even though Sony received a share in the royalties that DVD manufacturers paid, it was relatively insignificant compared to Toshiba's earnings from the technology...

Forming Alliancess

Learning from its Betamax experience, Sony set out to secure wider support, from companies ranging from content providers to computer makers, for the Blu-ray format. Recognizing the critical role that Hollywood studios played in the success of the VHS format, Sony went all out to woo these studios to adopt the Blu-ray system. It also tried to garner support for Blu-ray among electronics firms, technology firms, and game development companies. Sony even sought support from Matsushita, its major rival...

Promoting Blu-Ray ?

Realizing the importance of promotion and consumer communication in securing acceptance for the Blu-ray format, Sony made efforts to get its message across to the end-users.

It also hoped to use the strength of its movie, music, electronics, and games divisions to promote Blu-ray.

The different divisions of Sony aimed to present a united front, promoting all products related to high-definition in order to give greater exposure to Blu-ray...

Format Wars- Act II

While Sony was busy preparing for the launch of the PS3 and other Blu-ray products, the rival camp was also launching new products, an indication that the new format war was picking up momentum. The two sides had briefly tried for a compromise in 2005, but their inability to reach an agreement only added fuel to the conflict. One of the main reasons quoted for the failure of the compromise move was the difference in the make-up of the disc -- while the HD DVD disc required a 0.6-millimeter coating, a Blu-ray disc required 0.1 millimeter...


According to analysts, the format with the greater selection of movies had a better chance of ending up as the new standard. Hence, Sony was ensuring the release of a larger number of movie titles on Blu-ray. At least some industry analysts expected Blu-ray to overcome HD DVD. "Blu-ray is not only technically superior to HD DVD, it has a far stronger corporate backing, and has demonstrated the ability to have more content available to push the format," said gadgets blog Gizmodo in a feature...


Exhibit I: The BetaMax Logo
Exhibit II: Sony's First Betamax
Exhibit III: Markes Shares of VHS and Betamax Between 1975 and 1988
Exhibit IV: Blu-Ray Logo
Exhibit V: HD DVD Logo
Exhibit VI: Prominent Members of BDA
Exhibit VII: Prominent Members of the HD DVD Promotion Group
Exhibit VIII: More About the Features of Blu-Ray.
Exhibit IX: A Comparison of the features of the Blu-Ray, HD DVD, DVD.
Exhibit X: Some Movie Titles Available on Blu-Ray.
Exhibit XI: Some Movie Titles Available on HD DVD.
Exhibit XII: Revenue Share of Sony's Divisions for FY 2005.
Exhibit XIII: Companies Planning to Offer Blu-Ray Product.
Exhibit XIV: A Share of Sony's Divisions in the Company's Operating Income 2005-2006

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