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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"...obsessed with owning proprietary formats, Sony keeps picking fights. It keeps losing. And yet it keeps coming back for more, convinced that all it needs to do is push a bigger stack of chips to the center of the table." 1

- Jonathan Last in the Philadelphia Inquirer, in June 2006.

"I don't think Toshiba will back down. Sony is unlikely to give up either. Inevitably there is going to be some confusion in the market and there's going to be another standard war." 2

- Analyst Carlos Dimas, in 2004.


In June 2006, Sony Corp (Sony), one of the world's largest media corporations, released seven movie titles3 (including The Terminator, Black Hawk Down, and XXX) on Blu-ray4 - a next generation DVD5 format.

The releases came a couple of months after the introduction of HD DVD players, and the release of several movies on HD DVD, a rival format developed by Toshiba Corp6 (Toshiba), a multinational electronics company. Blu-ray and HD DVD were at the center of a format war, which would decide the successor to the existing DVD format.

Though both formats used similar technology, larger data storage capacity and better security seemed to have given Blu-ray a slight edge over the HD DVD. This was not the first time that Sony was involved in a format war. In 1975, it had launched a video system targeted at the home market called 'Betamax'.

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Though it was quite popular initially, Betamax later had to compete with the Video Home System (VHS), a rival video format launched by JVC7 in 1976. Through the 1980s, VHS sales far surpassed that of Betamax. Sony's failure to establish Betamax as the standard format was attributed largely to its sluggishness in forming alliances with others in the industry. Sony's marketing communication and promotion strategies were also blamed for the failure of Betamax.

Not wanting the Blu-ray to meet with the same fate as some of its earlier proprietary formats8 , Sony made quick moves to form alliances with other electronics firms, PC makers, and Hollywood studios. It formed the Blu-ray Development Association (BDA) in order to ensure support for the format. It also carried out an extensive promotion and PR campaign. Though HD DVD had certain advantages in cost because of a cheaper manufacturing process, Sony was confident that Blu-ray's greater storage, superior video quality, and better copyright protection features along with the fact that it had wider support would help it win the latest format war. This was all the more crucial because much of Sony's future profitability depended on the success of Blu-ray.

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

1] "One last thing/ Setting the stage for another flop?", June 04, 2006.

2] "DVD developers set for format war,", November 12, 2004.

3] By July 14, 2006, Sony Pictures had 26 movie titles on Blu-ray.

4] The Blu-ray is named after the core technology used -- a blue violet laser to read and write data on an optical disc. It is a combination of 'blue' (blue violet laser) and 'ray' (optical disc). The character 'e' was intentionally dropped so that the name could be registered as a trademark.

5] DVD (sometimes known as the Digital Video Disc or the Digital Versatile Disc) is an optical disc storage media format. It is used for the purpose of data storage, especially movies. The optical disc used in computing, sound and video reproduction, is a flat circular, usually polycarbonate disc upon which data is stored in the form of pits inside a flat surface. The data is accessed by using a laser to illuminate the special material on the disc, which is usually aluminum.

6] Toshiba is a Tokyo, Japan-based electronics manufacturing firm. It is the seventh largest integrated manufacturer of electric and electronic equipment in the world. Toshiba has a presence in diversified businesses like digital products, semiconductors, social infrastructure, home appliances, etc.

7] Victor Company of Japan was referred to as JVC. It was established in Japan in 1927. In 1953, it became a subsidiary of Matsushita -- a leading Japanese Electronics manufacturer which sold electronic goods under the brands Panasonic, National, Quasar, Technics, and Ramsa.

8] Apart from the Betamax, Sony suffered reversals on its Minidisc, Universal media disc (UMD) for the Playstation Portable, Sony Connect, a competitor to Apple's iTunes, Super Audio CD which competed with DVD-audio, etc.


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