Blu-Ray and HD DVD: Betamax - VHS 'Format Wars' Redux?
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Case Code: BSTR230 Case Length: 22 Pages Period: 1975-2006 Pub Date: 2006 Teaching Note: Available |
Price: Rs.400 Organization: Sony Corp. Industry: Electricals and Electronics Countries: USA Themes: Marketing, Strategic Alliances, Diffusion of Innovation, Competitive Strategies |
Abstract Case Intro 1 Case Intro 2 Excerpts
"...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."
- 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."
- Analyst Carlos Dimas, in 2004.
Introduction
In June 2006, Sony Corp (Sony), one of the world's largest media corporations, released seven movie titles (including The Terminator, Black Hawk Down, and XXX) on Blu-ray - a next generation DVD 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 Corp (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'.
Though it was quite popular initially, Betamax later had to compete with the Video Home System (VHS), a rival video format launched by JVC 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...
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