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Format War Drives Down Prices

17 May, 2007 By: Thomas K. Arnold

Blu-ray Disc may be getting the most traction — and the most hype, with the release next Tuesday of the first two “Pirates of the Caribbean” films on the high-definition optical disc format.

But the rival HD DVD camp is hardly sitting idly by. The HD DVD Promotional Group this week announced a series of ambitious marketing and retail campaigns, from running trailers of upcoming HD DVD releases in movie theaters to offering rebates on hardware. Under the rebate plan, consumers can buy a Toshiba HD DVD player for the record low price of $299.

“The Toshiba rebate is timed perfectly to coincide with the [May 22 Warner Home Video] release of the ‘Matrix' trilogy, one of the most anticipated releases on HD DVD to date,” said Ken Graffeo, executive VP of High Definition Strategic Marketing for Universal Studios Home Entertainment. “We believe consumers will see a $299 price for pristine HD content as a good reason to choose HD DVD.”

The Toshiba player initially retailed for $499, so with the rebate the effective price drop has been 40% in just one year — a dramatic decline so early in a format's life cycle. The announcement coincided with word that Panasonic is cutting its Blu-ray player price by more than half at the end of May, replacing its $1,299 BD 10 with a $599 BD 10A — a price that includes no fewer than five Blu-ray movies, including the highly anticipated “Pirates of the Caribbean” releases.

Observers say the format war is driving down prices a lot faster than they would be dropping ordinarily, which in turn will hasten consumer adoption of high-definition packaged media.

“At the end of the day it's a definite win for the consumer,” Graffeo said.

The HD DVD trailer campaign will reach approximately 30 million viewers, according to the promotional group. The trailer will run across a network of 932 Regal, AMC and Cinemark movie theaters nationwide, with exposure on 12,000 screens, in front of the summer's biggest blockbusters, including Spider-Man 3 (which, ironically, is from Sony Pictures, which only supports the Blu-ray Disc format).

The rebate kicks off May 20. At first, consumers who buy the $399 Toshiba HD-A2 player will receive an immediate $100 in-store rebate, as well as five free HD DVD movies, from a selection of 15. During the final week of the rebate, between June 10 and June 16, consumers can apply the $100 rebate to any Toshiba HD DVD player — or buy their HD DVD player along with any Toshiba HDTV with a screen size of at least 42 inches and receive a $200 rebate.

“We know that price is a powerful driver for consumers to adopt new technology,” said Jodi Sally, VP of marketing at Toshiba America Consumer Products.

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