Format wars part II

Return of the standards battle

It looks like the electronics industry is getting a replay of the video standards battle that raged between Betamax and VHS. Sony and Toshiba are currently standing toe-to-toe, waiting to see who blinks first in the supremacy battle surrounding Blu-ray and HD-DVD disc technology. But at least this time round, Sony has learnt the valuable lessons of history and is keen to negotiate a compromise. This bodes well for the electronics industry and consumers alike. Nobody wants to see a protracted battle like the Betamax and VHS conflict. For consumers, it would save the confusion and personal expense many suffered trying to commit to a particular format. And for the electronics industry, it would stop many manufacturers and content developers from making the financial error of backing the wrong horse.

Both Sony and Toshiba are well advised to heed the lesson of history right now and remember that such format battles are always financially damaging, and that both customers and market forces beyond their immediate control always have the final say in which system triumphs. How so? Well, VHS won its battle because consumers decided it was what they wanted. They liked the extended recording time and the price. And quite simply, it was this that provided much of the kinetic energy that snowballed VHS to market dominance. There were, of course, other contributing factors. But there were criticisms at the time that by not licensing the technology out fast enough, the company was slow in producing sufficient numbers to impact on the market. Additionally, film studios always have a big say in which recording system gets their support, and this naturally influenced the outcome in the VHS-Betamax battle.

All of those historic factors should be sounding very familiar to our two rivals today. Sony's Blu-ray is seen as the system that pushes technology forward and provides a greater capacity of 50Gbytes. Alternatively, Toshiba's HD-DVD has cost advantages because it is cheaper to manufacture.

However, it's fair to say that both systems share common features. Therefore, it is worthwhile for Sony and Toshiba to investigate how they can integrate two different formats into one system. Should this succeed, the Hollywood studios will be delighted. The disc market is a very substantial revenue stream for the filmmakers—they don't want bewildered customers dithering over what format to spend their cash on.

As for the two electronics giants themselves, they need this potential format battle to be nipped in the bud right now. Japanese consumer electronics companies are having a hard time at the moment, and many have revised downwards their financial forecasts. Plunging prices, ferocious time-to-market reductions, and reduced profitability mean that an epic standards war would be way too costly for the two companies.

Far better that Sony and Toshiba write a script that provides a happy ending.

TAGS: Toshiba
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