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Sony vs. Toshiba

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Yale School of Management
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In August of 2005, Sony and Toshiba suspended talks aimed at creating a unified standard for the next-generation, high definition DVD format. The two sides had been meeting offand-on for three years, trying to reconcile their separate development efforts aimed at creating a DVD with enough capacity to store a movie in high definition. While both Sony and Toshiba's new DVD players relied on blue lasers (as opposed to the red lasers in the first generation DVDs), the two formats were otherwise incompatible. Sony had already formed a Blu-ray Disc Association to marshal supporters and disseminate standards for its format. Meanwhile, Toshiba worked through the DVD Forum, the organization (of which Sony remained a member) that had determined the standards for the first generation of DVDs and which had endorsed Toshiba's HD-DVD design. The rupture between the two sides appeared to be final, as both camps planned to offer products utilizing their respective formats in 2006.

The stakes in this format dispute were high and promised to influence a wide range of technologies beyond DVD players. Optical storage media, like DVDs, were used in a variety of devices besides dedicated DVD players, including computers and game consoles. Furthermore, the new DVDs were a key piece in determining how the new high definition television landscape would be shaped. Customers had started purchasing high definition TVs but were still searching for sources of high definition content. Movie studios with high definition films were wondering how they would get their content to consumers.

Many observers noted that the battle over high definition DVDs fit a well-worn pattern at Sony. Like many Sony products, the Blu-ray DVD was technically elegant, functionally superior, and more costly than rival products. Sony also had been in a highly publicized standards war before, when its Betamax standard for home videotapes competed with and ultimately lost to the VHS format. This time, Sony was pinning a great deal of its future success and technical reputation on the success of the Blu-ray format. Sony's standing as a technological leader had been damaged in recent years and Blu-ray was part of its new CEO's plan to regain its reputation.

Unlike the Betamax-VHS battle, however, this time both sides could end up losing. Gartner, a consulting firm that specialized in forecasting media and high-tech trends, had concluded that as long as consumers faced uncertainty over a new technology, they would not upgrade to expensive new players. Instead, Gartner argued, the format war could end the hegemony of the DVD as a channel for digital content.

Published Date: 22/10/2006

Suggested Citation: Jaan Elias, Andrea Nagy,  Sharon Oster, Jean Rosenthal, and Spencer Hutchins, "Sony vs Toshiba," Yale SOM Case 06-016, October 22, 2006