Case study notes

Case study questions

Clearly, having the best technology does not guarantee success, but having poor technology can guarantee failure, so the technology has to be good. But there are many other factors that need to be considered such as distribution and supply. As well as licencing and getting other manufacturers on board to produce your system.

Computing operating systems: Windows/Apple/Linux;

Mobile phones?

MP3 players – different file formats

The first Blu-ray player launched by Sony (the primary developer of the Blu-ray format) was actually the PlayStation 3, which featured the ability to play Blu-ray disks. This gave Sony something of an upper hand for some time, because its PlayStation 3 games console has a built-in Blu-ray player. Sony had therefore sold more than 10 m Blu-ray units while only about 1 m HD-DVD players have been sold, mostly in Japan.

The PlayStation 3 was originally launched at a price of around £500, the first ‘pure’ Blu-ray player was launched later and at a price of around £800. Obviously, in comparison to the PlayStation this player lacked a number of features, particularly the ability to play games. Interestingly, one of the earliest machines to play HD-DVD was also a games console, the Xbox 360, which was Microsoft’s primary competitor against the PlayStation (and priced around £200 cheaper). Interestingly, both of these consoles were notably more expensive than Nintendo’s Wii, which was attracting much attention around this time. Despite the high technological performance of both the PlayStation and Xbox, Nintendo has been able to gain a majority share in the market (and this is also despite the PlayStation’s ability to play Blu-ray disks).

5. What additional factors helped Blu-ray win the battle? What role did licencing and networks play in the relative success of each format?

It is also worth noting that in the years prior to the launch of these formats, and immediately afterwards, Sony acquired a number of film studios. Sony was also rumoured to be paying some studios large sums to take on and stick with its format.

A much more difficult factor to unravel is the list of networks (formal and informal) that each group of firms developed. In some cases it was clear with firms listing associate members of each board. Once again Blu-ray had a longer list of members and interesting parties. It seemed Sony had learnt from its mistakes with VCR and it was not going to make the same mistake again (see Table 7.7).

Table 7.7: Interlinkages and networks between firms

Companies listed as Members of the Board or Managing Members
Blu-ray	HD-DVD
Apple Computer Corp. Dell, Inc. Hewlett Packard Company Hitachi, Ltd. LG Electronics Inc. Mitsubishi Electric Corporation Panasonic (Matsushita Electric) Pioneer Corporation Royal Philips Electronics Samsung Electronics Co., Ltd. Sharp Corporation Sony Corporation TDK Corporation Thomson Twentieth Century Fox Walt Disney Pictures and Television	Memory-Tech Corporation NEC Corporation Sanyo Electric Co.

6. What related industries contributed to the format war and how did they influence its outcome?

Few may be willing to admit it, but sex sells, and there is certainly a case that more convenient nudity (and the pornographers preferred choice between HD-DVD and Blu-ray) will play some role in determining which of the two formats are, ultimately, successful.

Music downloading destroyed the CD industry; the same may happen in DVD. Why would people go out to the shops to buy disks when they can buy high-definition movies straight away online? What does this suggestion say for the future of Blu-ray?

Interestingly, despite Apple giving its backing to the Blu-ray format; it has yet to produce a single computer with a Blu-ray drive. Instead, Apple seems to be concentrating on movies delivered across the internet, through iTunes and the new Apple TV, rather than on physical discs. So although Blu-ray has won this battle, it may not have won the war. As home internet speeds become faster and consumers get used to video on-demand services, the movie market could undergo a similar change to the music sector, with films downloaded rather than physically bought. Enter a new format war of online video . . .

8. What are the implications for innovation strategy, R&D expenditure and marketing for firms engaged in or likely to be engaged in a format war?

That there has to be joined up thinking between all three. Marketing has a role to play early on especially in terms of Public Relations etc. Clearly, technology alone will not ensure victory, relationships with a wide variety of partners is required.

This can be constructed on the board using two columns.

The list can be long and may include:

Technology superiority;

Industry support within;

Industry support outside;

Support from the supply chain;

Effective licensing strategy;

Effective marketing strategy; etc.