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Toshiba Surrenders in Home Movie War
TOKYO
(Feb. 08) – Japan’s Toshiba Corp waved the white flag in the
high-definition home movie war on Tuesday, giving up on its HD DVD
format after losing the support of key studios and retailers to the
Blu-ray technology backed by Sony Corp.Toshiba, which had hoped HD DVD
would drive growth in its consumer electronics business, said it would
aim to end its HD DVD business by the end of next month after losing
the support of key studios and retailers to the Blu-ray technology
backed by Sony.The decision by the electronics maker ends its battle
with a consortium led by Sony over who should set the standard for the
next generation of discs, a fight that confused shoppers and stalled a
move to the new technology in the $24 billion home DVD market.The
Blu-ray win means consumers no longer have to choose between rival
incompatible formats and run the risk of being stuck with a 21st
century equivalent of Betamax — Sony’s videotape technology that lost
out to VHS in the 1980s.Toshiba, which had hoped HD DVD would drive
growth in its consumer electronics business, said it would aim to end
its HD DVD business by the end of next month.”This was a very difficult
decision to make … but when we thought about the trouble we would
cause to consumers and our partners, we decided it was not right for us
to keep going with such a small presence,” Toshiba Chief Executive
Atsutoshi Nishida told a news conference.The company said it would
continue to service existing HD DVD products, and added it expected
bigger profits over the next year as it will cut spending earmarked to
promote HD DVD.The tide turned against HD DVD after the defection to
Blu-ray by Time Warner Inc’s Warner Bros studio last month.Big U.S.
retailers soon followed, including Wal-Mart Stores Inc (WMT .N), Best
Buy Co Inc. and online video rental company Netflix Inc., and pundits
began writing obituaries for HD DVD.CUTTING LOSSES
While
Toshiba has lost the chance to be the leader in the next generation of
movie discs, investors welcomed its decision to cut its losses on HD
DVD early and invest in more promising businesses.Toshiba’s shares
leapt nearly 6 percent on Monday, although they pulled back 0.6 percent
on Tuesday compared with a 0.9 percent rise in the benchmark Nikkei
average.Toshiba twinned the HD DVD exit with an announcement that it
and partner SanDisk Corp would spend about 1.7 trillion yen ($15.7
billion) on two new flash memory plants in a bid to catch up with
industry leader Samsung Electronics in the fast-growing
market.Investors are now waiting to see if and how Toshiba will get
access to Blu-ray technology for its home electronics business.”It’s
going to have to buy the technology from elsewhere or pay Sony or
Matsush*ta for the licenses,” said Tetsuro Miyachi, senior portfolio
manager at Franklin Templeton Investments Japan. “But the company saw
that this is still better than just continuing on with losses of tens
of billions of yen each year.”CEO Nishida said Toshiba has “absolutely no plans” to make or sell Blu-ray players.
Toshiba
has HD DVD agreements with studios including NBC Universal’s Universal
Pictures, Viacom Inc’s (VIAb.N) Paramount Pictures and DreamWorks
Animation SKG Inc (DWA.N), which will now likely have to switch to
Blu-ray.Existing Blu-ray supporters included News Corp ‘s (NWSa.N) 20th
Century Fox, Walt Disney Co (DIS .N) and Lions Gate Entertainment Corp
(LGF.N). Sony’s PlayStation 3 game console also plays Blu-ray
films.Toshiba, which began sales of HD DVD players in March 2006, has
sold 1 million players and recorders, including sales of drives for
another supporter, Microsoft Corp (MSFT .O), for its XBox 360 game
console.If Toshiba can clear hurdles to design software for Blu-ray, it
could use a joint venture with Samsung Electronics Co Ltd (005930.KS)
on optical discs to make Blu-ray players, analysts said.Toshiba could
also procure Blu-ray products from Sony or Matsush*ta Electric
Industrial Co (6752.T) and sell them under its own brand, they said.
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