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Page 2 of 2

Toshiba to drop HD DVD, sources say
Company says no decision has been made
By Thomas K. Arnold and Erik Gruenwedel

Feb 15, 2008

"An announcement is coming soon," said one source close to the HD DVD
camp. "It could be a matter of weeks."

Microsoft is the other big player in the HD DVD equation. Last fall
when Paramount Home Entertainment announced it was dropping its dual-
format strategy and would release titles only in HD DVD, giving that
side a brief resurgence, a pitch to journalists for interviews came
from a Microsoft email address.

Several phone calls to Kevin Collins, Microsoft's normally accessible
"HD DVD evangelist," were not returned. Nor were calls to Ken Graffeo,
the Universal Studios Home Entertainment executive who doubles as co-
president of the HD DVD North American Promotional Group.

When Warner abandoned HD DVD in January, the format was left with just
two of the six major studios backing it, Universal Studios Home
Entertainment and Paramount Home Entertainment. Blu-ray support among
independents is rising. ADV Films, Tai Seng Entertainment, Topics
Entertainment and National Geographic have all confirmed they are
going Blu-ray exclusive, while more than one indie that was releasing
titles just on HD DVD, including Surround Records and Opus Arte, will
now offer Blu-ray as well.

This week, two key retailers, Best Buy and Netflix Inc., both got off
the fence and threw their support behind Blu-ray exclusively, citing
widespread studio support and consumer preference. Both companies said
Warner's decision was a turning point in their strategies.

"We've listened to our customers, and we are responding," said Best
Buy president and COO Brian Dunn.

Netflix spokesperson Steve Swasey said it appeared the format war had
been won by Blu-ray for the benefit of everyone.

"We wanted to put an exclamation point behind that," he said.

Industry observers are closely watching Amazon, but there's been no
movement, other than a 50%% off sale for 150 HD DVD titles, including
"Transformers," "Zodiac" and "Stardust."

Blockbuster Inc. last summer already decided to offer only Blu-ray
Disc titles at its company-owned rental stores.

Chris Tribbey, Home Media Magazine senior reporter, contributed to
this report.

« PREVIOUS PAGE1 | 2

Save Print Email Reprints Toshiba to drop HD DVD, sources say
Company says no decision has been made
By Thomas K. Arnold and Erik Gruenwedel

Feb 15, 2008

The format war has turned into a format death watch.

Toshiba is widely expected to pull the plug on its HD DVD format
sometime in the coming weeks, reliable industry sources say, after a
rash of retail defections that followed Warner Home Video's
announcement in early January that it would support only the rival Blu-
ray Disc format after May.

Officially, no decision has been made, insists Jodi Sally, vp of
marketing for Toshiba America Consumer Products. "Based on its
technological advancements, we continue to believe HD DVD is the best
format for consumers, given the value and consistent quality inherent
in our player offerings," she said.

But she hinted that something's in the air. "Given the market
developments in the past month," she said, "Toshiba will continue to
study the market impact and the value proposition for consumers,
particularly in light of our recent price reductions on all HD DVD
players."

Immediately after the Warner announcement, the HD DVD North American
Promotional Group canceled its Consumer Electronics Show presentation.
The following week, data collected by the NPD Group revealed Blu-ray
took in 93%% of all hardware sales for that week.

Toshiba subsequently fired back, drastically cutting its HD DVD player
prices by as much as half, effective Jan. 15. But a hoped-for consumer
sales surge never materialized; retail point-of-sale data collected by
the NPD Group for the week ending Jan. 26 still showed Blu-ray Disc
players ahead by a wide margin, 65%% to 28%%.

Software sales have declined as well. The latest Nielsen VideoScan
First Alert sales data show the top-selling Blu-ray Disc title for the
week, Sony Pictures Home Entertainment's "Across the Universe," sold
more than three times as many copies the week ending Feb. 10 as the
top HD DVD seller, Universal Studios Home Entertainment's "Elizabeth:
The Golden Age." Blu-ray Disc titles also accounted for 81%% of all
high-def disc sales for the week, with HD DVD at just 19%%.

Toshiba had been pitching its discounted HD DVD players toward the
standard DVD crowd as well as high-def enthusiasts, noting in its ad
message that the new players would make DVDs look a lot better as
well. And as a last-ditch effort, the company ran an ad during the
Super Bowl -- a 30-second spot that reportedly cost $2.7 million.

But in the end, sources say, the substantial loss Toshiba is incurring
with each HD DVD player sold -- a figure sources say could be as high
as several hundred dollars -- coupled with a series of high-profile
retail defections has driven the company to at last concede defeat.

"An announcement is coming soon," said one source close to the HD DVD
camp. "It could be a matter of weeks."

Microsoft is the other big player in the HD DVD equation. Last fall
when Paramount Home Entertainment announced it was dropping its dual-
format strategy and would release titles only in HD DVD, giving that
side a brief resurgence, a pitch to journalists for interviews came
from a Microsoft email address.

Several phone calls to Kevin Collins, Microsoft's normally accessible
"HD DVD evangelist," were not returned. Nor were calls to Ken Graffeo,
the Universal Studios Home Entertainment executive who doubles as co-
president of the HD DVD North American Promotional Group.

When Warner abandoned HD DVD in January, the format was left with just
two of the six major studios backing it, Universal Studios Home
Entertainment and Paramount Home Entertainment. Blu-ray support among
independents is rising. ADV Films, Tai Seng Entertainment, Topics
Entertainment and National Geographic have all confirmed they are
going Blu-ray exclusive, while more than one indie that was releasing
titles just on HD DVD, including Surround Records and Opus Arte, will
now offer Blu-ray as well.

This week, two key retailers, Best Buy and Netflix Inc., both got off
the fence and threw their support behind Blu-ray exclusively, citing
widespread studio support and consumer preference. Both companies said
Warner's decision was a turning point in their strategies.

"We've listened to our customers, and we are responding," said Best
Buy president and COO Brian Dunn.

Netflix spokesperson Steve Swasey said it appeared the format war had
been won by Blu-ray for the benefit of everyone.

"We wanted to put an exclamation point behind that," he said.

Industry observers are closely watching Amazon, but there's been no
movement, other than a 50%% off sale for 150 HD DVD titles, including
"Transformers," "Zodiac" and "Stardust."

Blockbuster Inc. last summer already decided to offer only Blu-ray
Disc titles at its company-owned rental stores.

Chris Tribbey, Home Media Magazine senior reporter, contributed to
this report.

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