Caso Toshiba

Rev. May 18, 2009

case 1-428-594

Blu-ray versus HD DVD
It was an agonizing decision for me, but I thought if we kept running this business it would have grave ramifications for the management of our company. We made a quick decision, judging that there is no way of winning the competition. Atsutoshi Nishida, Toshiba President1

Sony management had just received word from Toshiba that itwould stop production and promotion of its next generation high-definition DVD players and recorder. The admission of defeat by Toshiba made Sony’s high-definition video format, Blu-ray, the industry standard. As Sony’s management reflected on its victory, it wondered why it had taken so long to resolve the conflict. It had been nearly six years since Sony first started its efforts to bring theBlu-ray format to market. During this time, Sony and Toshiba had spent millions of dollars each in research and development, alliance formation, marketing, and promotion. But had the long, costly, and drawn-out battle been necessary? Just a few months earlier, Toshiba had won over two powerful allies: Paramount and DreamWorks Animation. “This seems like a move of desperation,” said Andy Parson, amember of the Blu-ray Disc Association, referring to the Toshiba’s successful effort to swing the two movie producers to exclusively back its next generation high-definition DVD format, joining Universal Studios.2 By aligning with Toshiba exclusively, Paramount and DreamWorks were reported to have received $50 million and $100 million, respectively, and other promotion and marketing incentives. Themove would clearly affect the balance of power in the battle over the next generation high-definition DVD format. The Blu-ray format had an initial advantage over HD DVD, boasting superior technological performance and locking up key industry players in its alliance, such as Disney, 20th Century Fox, and Dell Computer. However, executives at Sony were all too familiar with what happened in the VHSand Betamax war. At the time, Sony’s Betamax format was pegged as the superior format, but eventually lost out to the VHS format due to a variety of strategic missteps by Sony. Sony did not want to repeat history, and the announcement by Paramount and DreamWorks had many executives at Sony concerned. In the end, however, Sony prevailed. Now it was time for Sony to evaluate.

Published byGlobaLens, a division of the William Davidson Institute at the University of Michigan. © 2010 William Davidson Institute. Research Associate Moses Lee developed this case under the supervision of Professor Michael Jensen.

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Sony
Founded in 1946 in Tokyo, Japan, Sony Corporation was an international technology giant with products in audio, video, television, information/communications, semiconductors and electronics. For its 2006 fiscal year, Sony recorded revenues of approximately $70 billion. Sony’s mission paralleled the etymology of its name, created by merging the Latin root for sound, ‘sonus,’with ‘sonny,’ which means “little son.” According to Sony Corporation, the name was designed to show that “Sony is a very small group of young people who have the energy and passion toward unlimited creation.”3 Sony’s business strategy focused on innovation and quality, allowing the company to achieve higher margins on its products in the marketplace. In Sony’s electronics business, the mostprofitable products were cameras, such as video and digital cameras. In 2003, the profit margin of cameras was 9.1%, much higher than any other of the Sony electronics products. As a comparison, profit margins were 6.7% for audio products, 3.5% for television, and 4.0% for semiconductors. However, by the early 2000s, due to decreasing revenues and a lack of major products, Sony had become concerned...