That no-risk assessment raises questions, however. Does a person's purchase of an HD DVD player mean that they intend to begin investing heavily in a new library of movies? The question is not unlike the one that hangs over the PlayStation 3's inclusion of a Blu-ray Disc player (and a very capable one, at that): Just because it can play Blu-ray Discs doesn't mean people will buy the discs.
Ultimately, the movie "software" is a key component of this story. The truth will be seen in the coming months, when we'll learn whether Blu-ray can maintain its healthy 2:1 disc sales ratio.
As of the beginning of August, The NPD Group estimates, cumulative units shipped to retailers totaled about 200,000 for Blu-ray and 256,000 for HD DVD. Of the stand-alone high-def players sold, NPD says, more than 70 percent sell for less than US$500.
"You'll see a short-term rise in HD DVD software sales," theorizes Erickson, "rooted in the fact that a big burst of players have sold through [recently]. The first step to sustaining long-term large increases in software sales is getting the hardware in-house, which Toshiba has done. The HD-A2 is a Trojan horse, just like the PlayStation 3 is for Blu-ray."
The second step to boosting software sales, adds Erickson, is having a large library of content. In this respect, HD DVD still falters: Of the major studios, only DreamWorks, Paramount, and Universal are exclusively in its camp. Warner Brothers continues to straddle the line ably, although Dan Silverberg of Warner has said that the company is continually reevaluating its dual-format stance, based on where the market currently stands. Silverberg has indicated that such analysis could mean that nothing will change--or that everything might change by the start of next year.
Meanwhile, if you want to watch The Simpsons Movie, Close Encounters of the Third Kind, Cars, or Ratatouille, you'll need a Blu-ray Disc player, since those titles are exclusive to Blu-ray Disc.
Well, at least the HD DVD player you just scored for a song will upconvert your DVDs for your bedroom HD set. Or maybe it will come in handy when you want to buy the classic Star Trek series for the umpteenth time, on HD DVD.
Long term, is the price sustainable?
Now that consumers have had a taste of high-definition DVD at the just-barely-under-$100 price, will they happily buy players at US$300 and US$400--let alone over-US$500 models? I'm not so sure. Given these recent shenanigans, if I were a high-def-TV-owning consumer contemplating a high-def player, I'd hold off on both formats for now and wait until sales or price cuts bring the costs down even further. (I'd use the money to vacation in Hawaii instead.)
That would be my protest against the format war, as well as against Toshiba's gimmicky pricing intended to move older players. A consumer backlash is bound to come: After all, how would you feel if you'd bought Toshiba's newer model, the HD-A3, for US$300, and then saw the virtually identical (albeit six months older) HD-A2 going for one-third the price? It's not quite the same as Apple's infamous iPhone price cuts, but close enough to strike a nerve with consumers.
Consumers are smarter than they used to be, notes Richard Doherty, an analyst with the Envisioneering Group; as it is, they felt taken for a ride once they heard about the payoff Paramount received to go HD DVD exclusive this summer.
A digression: It's plausible that to maintain sales momentum, Toshiba may be equally as aggressive in lowering the price of its HD-A3 players, either through a direct price cut or rebates. You'd think the company would be taking a huge hit on the cost--some reports I saw pegged Toshiba's losses at US$500 per player. Other reports, however, note that the HD-A3 has an identical twin in a line of Chinese-manufactured players, models intended for the CH DVD (a China-only HD DVD variant) market; if that's the case, perhaps Toshiba is managing greater economies of scale in manufacturing its low-end players than anyone previously surmised.