Originally Posted by estoyloco
Cheaper players do matter.
I said before that Toshiba shot themselves in the foot, when they did the A2 firesale.
Any J6P looking for an HD DVD player in December probably passed on it with the recent $99 HD DVD player sale in mind. Obviously the demand was there as it resulted in immediate stock depletion of the players at that price point.
However, Toshiba's inability to keep prices reasonably low after that probably killed HD DVD in December.
Going from $99 to $299 for a similar player (model difference which probably doesn't matter to J6P) is too much of a difference.
I for one did not buy into HD DVD for this reason until the end of December when Amazon had a decent sale on HD-A3 for $163+10 movies. However, I ended up returning all of it due to Warners announcement. There was no way I was going to make a huge investment on 30% studio support. And yes I say huge investment because you have to consider the purchase as a whole and not just one item at a low price (i.e. price of player+software).
Also just because people want cheap players does not mean they will not buy software. When DVD first came out, I was reluctant to buy an expensive DVD player. It wasn't until I got my first JVC DVD player for $150 that I got into the DVD market. Soon after that I was endlessly buying movies for it, and built a collection of 100 DVD's on a college student's salary (i.e. small income).
For myself this Christmas season, lost sales were $200 in HD DVD movies (given as a gift) that was cancelled and a Harry Potter set around $100 (buying myself).
So yes low prices does matter. However those low prices must be sustained and not a one time deal. If people say price does not affect sales/adoptation then you really have not worked sales. I worked retail at CC during the time that DVD became mainstream with Apex driving it. DVD players moved slowly until that point, after which other CE's were forced to drop the price and became mainstream.
HDM should work like the Gillete model. Sell at a low discounted price (Player-Razor) and rape on the refills (HD-DVDs/BDs - Blades).
DVD took off upon adoption of this model, even more so when their prices hit < $100. It is going to be hard for HDM to overcome DVD if they keep their premiums. Today's consumer is different from the past. There is no more price-quality mindset. J6P will just buy the cheapest version available, why do you think so many off-brand CE's are doing so well? Because price sells in today's retail world.
I don't think the razor blade theory works for optical disc hardware.
See, with CE products like game consoles, the companies involved control the entire chain, from hardware to licensing to software, so they get the money from the "razors" and the "blades", and can choose to make their money from either one, or both, in any proportion they like. Considering how much larger their licensing fees are for game software, they have a LOT of latitude in this. This is a true "loss leader" formula that works, and has been proven to work for decades.
With things like high definition players, not everyone holds patents on HDM software, and thus there needs to be an incentive for manufacturers who aren't in the licensing pool to produce players. Even for those that are primary patent holders, I am sure the license-cost-per-disc is a miniscule fraction of what Sony, Microsoft and Nintendo are getting per disc on their game software.
This really has been the fatal flaw in Toshiba's marketing strategy for HD DVD, in my opinion. Toshiba's slash and burn pricing strategy on hardware was possible only because they control a majority share in the licensing pool for HD DVD. They could price the players at any price point they wanted, on the expectation that they would eventually get it back in licensing if the format took off. The problem with this approach is that it pushed all other manufacturers away - not only did it make Toshiba look desperate, but it also made any CE think twice about entering a market where there was literally zero profit to be made - particularly when there was another option available to them in the same industry that was selling at least reasonably well, with a much healthier profit margin.
Even a disinterested observer would raise eyebrows at the sort of losses Toshiba was incurring on their early units (nearly as much as the early PS3 per unit on the HD-A1, and that's without the golden parachute of hefty licensing fees to soften the blow). Later revisions to the hardware would do good things to the build cost, of course, but certainly not to the extent of Toshiba actually making any sort of a net profit per unit, even if you don't include the mega-spending they've done on advertising, research and development, and other associated costs.
Taken in context, while I agree that price is a major factor in a purchasing decision, the whole concept behind a supply-demand curve is that there must be a reason for someone to supply a product at a given price point to meet the demand. You can certainly sell HDM players for $1 to virtually everyone, but you'd lose your shirt in the process - so you don't do it. That's really what Toshiba was trying to do. Take losses early to proliferate hardware install base, and hope you can optimize build costs faster than you're dropping hardware pricing.
Unfortunately for Toshiba, it didn't work. Price wasn't the only factor. Marketing and perception played a huge role, as big box retailers pushed the higher-profit product in their own self-interest.
Thus we saw that Blu-ray standalones handily
beat HD DVD standalone sales this holiday season despite the disparity in pricing.