Toshiba Highly Likely To Withdraw From HD DVD Business
By YUKARI IWATANI KANE and SARAH MCBRIDE
February 16, 2008 11:39 p.m.
TOKYO -- Toshiba Corp. is highly likely to pull out of the HD DVD business early this week, people familiar with the situation said, marking the end of an intense battle over next-generation formats against Sony Corp.'s Blu-ray technology.
Since Time Warner Inc.'s Warner Bros. decided last month to support Blu-ray exclusively, sales of Blu-ray players and movies have started to gain momentum, putting pressure on Toshiba to consider its options.
"Sales have been hurt since Warner's decision, and we are considering different options," said Keisuke Oomori, Toshiba's spokesman, though he said that nothing has been decided at this point.
If Toshiba withdraws from the HD DVD business, Viacom Inc.'s Paramount Pictures and General Electric Co.'s Universal Pictures, both of which currently support the format exclusively, would be immediately released from their commitments, a person familiar said.
Over the past several years, supporters of HD DVD and Blu-ray have been engaged in a fierce war over the high-definition DVD market as each side launched major campaigns to woo movie studios, retailers and ultimately consumers to their side.
Toshiba was particularly aggressive with price cuts during the holiday season and had been buoyed by solid sales of its players by the end of last year. But its fortunes changed when Warner Bros. chose to back Blu-ray in early January, leaving HD DVD with just a 25% share of the high-definition video market. That meant consumers, who bought HD DVD players, would have far fewer movie titles to choose from.
The Blu-ray side has also benefited from a strong increase in sales of Sony's PlayStation 3 videogame console, which comes with a Blu-ray player.
Toshiba made a last ditch effort to save its HD DVD business by slashing its prices on the players in January by as much as 25% in the U.S., but Blu-ray players still outsold HD DVD players by more than two to one, according to analysts. Movie sales figures have been even more telling. Nearly 80% of high-definition software sales were for the Blu-ray format in January, analysts said.
Meanwhile, retailers, which had been relatively neutral, began successively expressing their support for Blu-ray, in the hopes of putting a quick end to the battle. Retailers are hoping that a decision would persuade consumers who have been cautious about buying high-definition players and movies while a format battle was continuing.
In recent weeks, the situation had become increasingly grim for Toshiba and HD DVD supporters. Major retailers like consumer electronics giant Best Buy Co. Inc., online video rental company NetFlix Inc. and Wal-Mart all sided with Blu-ray just in the past week alone.
Write to Yukari Iwatani Kane at yukari.iwatani@wsj.com1 and Sarah McBride at sarah.mcbride@wsj.com2