Sub $100 HD DVD Players – what is Toshiba’s plan?
The news last week was all about Wal-Mart offering the Toshiba HD-A2 player for only $98 on their “secret” sale. Reports suggested that these super cheap HD DVD players were quickly sold out, some as soon as half an hour after they went on sale (thanks for the Internet for spreading news of this “secret” sale). Other retailers soon followed, including web stores like Amazon, and eventually even the newer model HD-A3 started to drop in price.
There’s a couple of things that need to be taken into account. First of all, the HD-A2 (the low end model from Toshiba, with only 1080i output, although it makes no difference to most people with 1080p TVs – see why) may very well turn into a superseded model. The “2” represents the second generation of HD DVD players, the current generation’s low end model is the HD-A3. Toshiba have yet to announced the discontinuation of the A2 though, and some of the players sold in the $98 sale have very recent manufacturing dates. Second, the sale was only for one day, it is not the new permanent retail price for low end HD DVD players, although it has helped to lower the price of the A3 as well (retail price of $299, now available for $199 at many places).
With that out of the way, the $98 price for the HD-A2 is really nothing short of amazing. Remember that you get 5 free HD DVD movies by redemption with it too, and so, the player is practically free. The A2 also includes DVD upscaling, and while the upscaling quality is not as good as the much more expensive high end HD-XA2, it is on par with most DVD upscalers that you find for this price. I would say that even at $200, the HD-A2/A3 still represents good value if you are in the market for a DVD upscaler too.
So the question is how did Toshiba manage to get prices so low when Blu-ray players are still so expensive in comparison? How much money is Toshiba losing per player sold, or are the retailers selling below cost? And what does this mean for the HD format war?
Without one of the retailers coming clean, I don’t think we will ever find out just what went on behind the scenes to get prices so low. I think Toshiba would have wanted to get rid of old superseded stock, and this might have convinced them to lower prices per unit, perhaps at cost or lower. Wal-Mart, on the other hand, might have wanted to spur HD sales for the holiday season and so might have sold these players at cost too. All the other retailers probably followed suit because they don’t want to be left out. I don’t agree with some assertions out there that Toshiba is losing $500 per player. The cost established for the HD-A1 back in 2006 was over $600, but costs will have dropped considerably by now – one, because the HD-A2 is built entirely differently to the A1 (the A1 was built more like a computer, whereas the A2 is built as a standalone with the associated cost advantages – the A3’s build costs are even lower), and two, that while some of the $98 stock were made in Japan (where the A1/A2 was initially made I believe), these are now mainly Chinese made. Chinese made DVD players can be made for as little as $USD 10 (a few dollars more if you include licensing fees), and this was a couple of years ago. I’m not saying that HD DVD players can be made for $10, but $90 is certainly within reason. HD DVD standalones have sold way more units than Blu-ray standalones around the world (Blu-ray has a overall lead in sales due to the heavily subsidized PS3), and so it is safe to assume that HD DVD player pricing will be lower than Blu-ray player pricing, which itself is coming down fast too. There is also the factor of the Chinese CH DVD players, which I will talk about in detail in a later blog, but this new format uses many of the same components as HD DVD and by selling large quantities to the Chinese market, it will in turn help to lower production costs for HD DVD players too.
As to the HD format war, I don’t think this will have much of an impact in the grander scheme of things. 100,000 players is nothing compared to the number of DVD players sold every day. But what Toshiba had managed to do was to promote HD DVD and get people excited about it just in time for the holiday shopping season. For every person that picked up a $98 player, they are likely to buy a new more HD DVD movies in addition to the free movies they get (the Transformers HD DVD probably on top of their list) and that’s what Toshiba is counting on. The attachment rate (the number of movies sold to each player) of standalones is much higher than compared to consoles based HD players like the PS3 or the Xbox 360 (this is something I’ll also be talking about in another blog entry), and while Blu-ray has concentrated their efforts on the PS3, HD DVD has been hammering away at the standalone market. The momentum is certainly with HD DVD, and Blu-ray’s minor price cuts will look futile in comparison. At this early stage in the war, momentum is all you can ask for, really.