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
Excerpts
Sony's First Format War
In 1963, Sony introduced the first VTR for use in business and the airline, educational, and medical fields. In 1964, it introduced a new VTR called CV-2000 for home use. In 1971, it launched the 'U-Matic' system, the world's first commercial color video cassette format. In this format, the videotape was housed in a cassette as opposed to the open-reel format prevalent at that time. It had cartridges that used a 3/4 inch tape and had a playing time of 90 minutes. Later, Sony developed two players - the VP-1100 video cassette player and the VO-1700 VCR -- to play and record on the new tapes respectively. The 'U-Matic' system was quite popular in North America and Japan and was widely used in television stations, schools, and businesses...
Betamax Vs VHS
Earlier in 1974, in order to establish the Betamax format as the standard, Sony had demonstrated the prototype to several electronic manufacturing firms and sought to license the Betamax technology. Initially, companies like Toshiba, Pioneer Corp , Aiwa , Zenith , and Wega Corp. signed up. However, several other companies like Matsushita, JVC, and RCA declined. Sony was to learn very soon why JVC did not show any interest in licensing its technology. In 1976, JVC introduced VHS, a rival video format that was not compatible with Betamax. By then, Betamax had sold over 100,000 units and had virtual monopoly in the market...
VHS Wins...
By the mid-1980s, sales of VHS machines were far ahead of Betamax. With the availability of video cassette players, more people were keen on watching movies in the comfort of their homes. Sensing a demand, JVC licensed the VHS technology to movie studios so that they could release their movies on VHS. Thus, for a time, video cassettes of just-released movies were available only on VHS. By the time movies came to be released in the Betamax format, Betamax was already on its way out. Also, when video cassettes were released, the studios expected that people would buy them the same way that they bought audio cassettes...
...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...
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...
Outlook
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...
Exhibits
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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