Originally Posted by Kosty
What is your concern about Toshiba taking a loss on the Gen 1 players?
The way I feel about it is this:
First, it may not be true. The teardown analysis is an estimate only. Toshiba builds PCs and has buying power, a similar laptop at cost could be built for $500. Intel and other component makers have an incentive to provide components for free. Etc. Etc. Only Toshiba knows the costs.
Next even if it was true, assuming a $200 loss per unit and 70,000 units thats an one time $14,000,000 subsidy to launch the HD DVD format and prime the demand. The Blu-Ray group just wasted millions this month on the format launch which hardly affected the Samsung sales.
Since the current player is PC based and already has been used for four firmware updates, the current players being released is in effect a large scale final beta or release candidate test that has succeeded in getting a positive impression among first adopters.
If Toshiba did subsidize the launch, what it did buy was a first to market advantage, a product demonstration that the HD DVD technology worked, highlighted the flaws in the Blu-Ray MPEG2 SL25 picture and raise the bar that the G1 Blu-Ray ran into to. And created great word of mouth advertising and created evengelical users and converted many people to the HD DVD camp. It also may have pushed content providers to release more movies to the format. Thats seems to me to be a pretty good deal for the money.
The next generation of HD DVD players will have more refined designs and will be cheaper to build. Software on a Chip and more straightforward components produced in larger quantities will be cheaper to build. So even if you assume a loss per unit, it will likely be reduced in the future.
The cost for a comparable HD DVD unit and a Blu-Ray unit produced in the same quantities is likely to have the HD DVD unit cheaper as it is closer to a CE standard DVD player than the Blu-Ray player.
If Toshiba added extra goodies, multiple DSPs etc, to provide a premium early adopter experience, then its a good value for the consumer.
The only significant concern would be if Toshiba would in the future take a large loss on millions of units. But thats probably not going to happen.
Any subsidy argument also applies to the Playstation 3 where because of the volume involved Sony's risk is much greater. And Toshiba has already reaped the rewards with a player that has came first to market with performance that counts.
If Toshiba has subsidized the launch, still unproven IMHO, then what we have is a win win sitution for Toshiba RCA and consumers. The HD DVD camp gains an advantage and only Sony and the Blu-RAy camp suffers. Not Consumers.
If Toshiba is not selling at a loss, then they have an even greater advantage.
Again, the HD DVD lose on every player, even if it is occuring, is a TEMPORARY situation and is sustainable by Toshiba in the short term.
So who cares? I like it if consumers are getting a better deal.
Please tell me what I am missing.