Sony vs Toshiba: The Fog of a Format War Obscured a Complicated High Definition Landscape

Jaan Elias; Andrea R.Nagy; Sharon M.Oster; Jean Rosenthal; Spencer Hutchins

doi:10.4135/9781473974395

Cases

Sony vs Toshiba: The Fog of a Format War Obscured a Complicated High Definition Landscape

By:
Jaan Elias
,
Andrea R. Nagy
,
Sharon M. Oster
,
Jean Rosenthal
&
Spencer Hutchins
Publisher: Yale School of Management
- Publication year: 2006
- Online pub date: March 06, 2016
Discipline: New Product Design & Marketing, Competitive Strategy, Strategic Alliances
DOI: https://doi.org/10.4135/9781473974395
Keywords:
Blu-ray discs, DVD, electronics, high definition television, Microsoft, optical media, royalties
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Contains: Content Partners | Teaching Notes

Length: 10,753 words

Region: Global

Originally Published In:
Elias, J. , Nagy, A. , Oster, S. , Rosenthal, J. W. , & Hutchins, S. ( 2006). Sony vs Toshiba: The Fog of a Format War Obscured a Complicated High Definition Landscape. 06-016. New Haven, CT: Yale School of Management, Yale University.

Industry: Manufacture of computer, electronic and optical products| Manufacture of electrical equipment

Type:
Indirect caseinfo

Organization: Sony| Toshiba Corporation

Organization Size:
Largeinfo

Online ISBN: 9781473974395

Copyright: Certain material used with permission of Yale School of Management. © 2006. All rights reserved.

More informationLess information

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Case
Teaching Notes
Supplementary Resources

Abstract

In August of 2005, Sony and Toshiba suspended talks aimed at creating a unified standard for the next-generation, high definition DVD format. The two sides had been meeting off-and-on for three years, trying to reconcile their separate development efforts aimed at creating a DVD with enough capacity to store a movie in high definition. While both Sony and Toshiba’s new DVD players relied on blue lasers (as opposed to the red lasers in the first generation DVDs), the two formats were otherwise incompatible. Sony had already formed a Blu-ray Disc Association to marshal supporters and disseminate standards for its format. Meanwhile, Toshiba worked through the DVD Forum, the organization (of which Sony remained a member) that had determined the standards for the first generation of DVDs and which had endorsed Toshiba’s HD-DVD design. The rupture between the two sides appeared to be final, as both camps planned to offer products utilizing their respective formats in 2006.

The stakes in this format dispute were high and promised to influence a wide range of technologies beyond DVD players. Optical storage media, like DVDs, were used in a variety of devices besides dedicated DVD players, including computers and game consoles. Furthermore, the new DVDs were a key piece in determining how the new high definition television landscape would be shaped. Customers had started purchasing high definition TVs but were still searching for sources of high definition content. Movie studios with high definition films were wondering how they would get their content to consumers.

Many observers noted that the battle over high definition DVDs fit a well-worn pattern at Sony. Like many Sony products, the Blu-ray DVD was technically elegant, functionally superior, and more costly than rival products. Sony also had been in a highly publicized standards war before, when its Betamax standard for home videotapes competed with and ultimately lost to the VHS format. This time, Sony was pinning a great deal of its future success and technical reputation on the success of the Blu-ray format. Sony’s standing as a technological leader had been damaged in recent years and Blu-ray was part of its new CEO’s plan to regain its reputation.

Unlike the Betamax-VHS battle, however, this time both sides could end up losing. Gartner, a consulting firm that specialized in forecasting media and high-tech trends, had concluded that as long as consumers faced uncertainty over a new technology, they would not upgrade to expensive new players. Instead, Gartner argued, the format war could end the hegemony of the DVD as a channel for digital content.

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Resources

Exhibit 1: Sony Corporation Financials, 2005–2006 Consolidated Balance Sheets

Sony Corporation and Consolidated Subsidiaries – March 31


	Yen in millions		Dollars in millions
	2006	2005	2006	2005
ASSETS
Current assets:
Cash and cash equivalents	¥703,098	¥779,103	$6,009	$7,281
Marketable securities	536,968	460,202	4,589	4,301
Notes and accounts receivable, trade	1,075,071	1,113,071	9,189	10,403
Allowance for doubtful accounts and sales returns	(89,563)	(87,709)	(765)	(820)
Inventories	804,724	631 349	6,878	5,900
Deferred income taxes	221,311	141,154	1,892	1,319
Prepaid expenses and other current assets	517,915	519,001	4,426	4,837
Total current assets	3,769,524	3,556,171	32,218	33,235
Film costs	360,372	278,961	3,080	2,607
Investments and advances:
Affiliated companies	285,870	252,905	2,443	2,364
Securities investments and other	3,234,037	2,492,784	27,642	23,297
	3,519,907	2,745,689	30,085	25,661
Property, plant and equipment:
Land	178,844	182,900	1,529	1,709
Buildings	926,783	925,796	7,921	8,652
Machinery and equipment	2,327,676	2,1g2,038	19,895	20,486
Construction in progress	116,149	92,611	993	866
	3,549,452	3,393,345	30,338	31,713
Less—Accumulated depreciation	2,160,905	2,020,g46	18,470	18,887
	1,569,403	1,545,880	13,414	14,448
Other assets:
Intangibles, net	207,034	187,024	1,770	1,748
Goodwill	299,024	283,923	2,556	2,653
Deferred insurance acquisition costs	383,156	374,805	3,275	3,503
Deferred income taxes	178,751	240,396	1,528	2,247
Other	501,438	459,732	4,285	4,297
	1,569,403	1,545,880	13,414	14,448
Total assets	¥10,607,753	¥9,499,100	$90,665	$88,777


	Yen in millions		Dollars in millions
	2006	2005	2006	2005
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	¥142,766	¥63,396	$1,220	$592
Current portion of long-term debt	193,555	166,870	1,654	1,560
Notes and accounts payable, trade	813,332	806,044	6,952	7,533
Accounts payable, other and accrued expenses	854,886	746,466	7,307	6,976
Accrued income and other taxes	87,295	55,651	746	520
Deposits from customers in the banking business	599,952	546,718	5,128	5,110
Other	508,442	424,223	4,345	3,965
Total current liabilities	3,200,228	2,809,368	27,352	26,256
Long-term liabilities:
Long-term debt	764,898	678,992	6,538	6,346
Accrued pension and severance costs	182,247	352,402	1,558	3,293
Deferred income taxes	216,497	72,227	1,850	675
Future insurance policy benefits and other	2,744,321	2,464,295	23,456	23,031
Other	258,609	227,631	2,211	2,127
Total liabilities	7,366,800	6,604,915	62,965	35,472
Minority interest in consolidated subsidiaries	37,101	23,847	317	223
Stockholders’ equity:
Subsidiary tracking stock, no par value—2005—Authorized 100,000,000 shares, outstanding 3,072,000 shares	—	3,917	—	36
Common stock, no par value—2005—Authorized 3,500,000,000 shares, outstanding 997,211,213 shares		617,792		5,774
2006—Authorized 3,500,000,000 shares, outstanding 1,001,679,664 shares	624,124		5,334
Additional paid-in capital	1,136,638	1,134,222	9,715	10,600
Retained earnings	1,602,654	1,506,082	13,698	14,076
Accumulated other comprehensive income—
Unrealized gains on securities	100,804	62,669	862	586
Unrealized losses on derivative instruments	(2,049)	(2,490)	(18)	(23)
Minimum pension liability adjustment	(39,824)	(90,030)	(340)	(841)
Foreign currency translation adjustments	(215,368)	(355,824)	(1,841)	(3,326)
	(156,437)	(385,675)	(1,337)	(3,604)
Treasury stock, at cost
Subsidiary tracking stock (2005—32 shares)	—	(0)	—	(0)
Common stock (2005—1,118,984 shares)		(6,000)		(56)
(2006—740,888 shares)	(3,127)		(27)
Commitments and contingent liabilities	3,203,852	2,870,338	27,383	26,826
Total liabilities and stockholders’ equity	¥10,607,753	¥9,499,100	$90,665	$88,777

Consolidated Statements of Income

Sony Corporation and Consolidated Subsidiaries – Years ended March 31
	Yen in millions		Dollars in millions
	2006	2005	2006	2005
Sales and operating revenue:
Net sales	¥6,692,776	¥6,565,010 537,715	$57,203	$61,355
Financial service revenue	720,566	56,891	6,159	5,025
Other operating revenue	62,094		531	532
	7,475,436	7,159,616	63,893	66,912
Costs and expenses:
Cost of sales	5,151,397	5,000,112	44,029	46,730
Selling, general and administrative	1,527,036	1,535,015	13,052	14,346
Financial service expenses	531,809	482,576	4,545	4,510
Loss on sale, disposal or impairment of assets, net	73,939	27,994	632	261
	7,284,181	7,045,697	62,258	65,847
Operating income	191,255	113,919	1,635	1,065
Other income:
Interest and dividends	24,937	14,708	213	137
Royalty income	35,161	31,709	301	296
Foreign exchange gain, net	—	—	—	—
Gain on sale of securities investments, net	9,645	5,437	82	51
Gain on change in interest in subs & equity investees	60,834	16,322	520	153
Other	23,039	29,447	197	275
	153,616	97,623	1,313	912
Other expenses:
Interest	28,996	24,578	248	230
Loss on devaluation of securities investments	3,878	3,715	33	35
Foreign exchange loss, net	3,065	524	27	5
Other	22,603	25,518	193	238
	58,542	54,335	501	508
Income before income taxes	286,329	157,207	2,447	1,469
Income taxes:
Current	96,400	85,510	824	799
Deferred	80,115	(69,466)	684	(649
	176,515	16,044	1,508	150
Income before minority interest, equity in net income of affiliated companies and cumulative effect of an accounting change	109,814	141,163	939	1,319
Minority interest in income (loss) of consolidated Subsidiaries	(−626)	1,651	(−5)	15
Equity in net income of affiliated companies	13,176	29,039	113	271
Income before cumulative effect of an accting change	123,616	168,551	1,057	1,575
Cumulative effect of an accounting change (2004: Net of income taxes of ¥0 million 2005: Net of income taxes of ¥2,675 million)	—	(−4,713)	—	(−44)
Net income	¥123,616	¥163,838	$1,057	$1,531

Exhibit 2: CD Percentage of Music Sales, 1989, 1991, 1993–2005


	1989	1991	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005
Full-length CDs	25.1	38.9	51.1	58.4	65.0	68.4	70.2	74.8	83.2	89.3	89.2	90.5	87.8	90.3	87.0
Full-length cassettes	54.8	49.8	38.0	32.1	25.1	19.3	18.2	14.8	8.0	4.9	3.4	2.4	2.2	1.7	1.1
Singles (all types)	10.7	8.8	9.2	7.4	7.5	9.3	9.3	6.8	5.4	2.5	2.4	1.9	2.4	2.4	2.7
Music videos (VHS & DVD)	NA	0.4	1.3	0.8	0.9	1.0	0.6	1.0	0.9	0.8	1.1	0.7	0.6	1.0	0.7
DVD audio	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	1.1	1.3	2.7	1.7	0.8
Digital download	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	0.2	0.5	1.3	0.9	5.7
SACD	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	0.5	0.8	1.2
Vinyl LPs	9.2	1.7	0.3	0.8	0.5	0.6	0.7	0.7	0.5	0.5	0.6	0.7	0.5	0.9	0.7

Source: Recording Industry Association of America Consumer Profiles

Exhibit 3: Toshiba Corporation Financials, 2005–2006 Consolidated Balance Sheets

Toshiba Corporation and Subsidiaries – As of March 31, 2006 and 2005


	Yen in millions		Dollars in millions
	2006	2005	2006	2005
ASSETS
Current assets:
Cash and cash equivalents	¥703,098	¥779,103	$6,009	$7,281
Marketable securities	536,968	460,202	4,589	4,301
Notes and accounts receivable, trade	1,075,071	1,113,071	9,189	10,403
Allowance for doubtful accounts and sales returns	(89,563)	(87,709)	(765)	(820)
Inventories	804,724	631 349	6,878	5,900
Deferred income taxes	221,311	141,154	1,892	1,319
Prepaid expenses and other current assets	517,915	519,001	4,426	4,837
Total current assets	3,769,524	3,556,171	32,218	33,235
Film costs	360,372	278,961	3,080	2,607
Investments and advances:
Affiliated companies	285,870	252,905	2,443	2,364
Securities investments and other	3,234,037	2,492,784	27,642	23,297
	3,519,907	2,745,689	30,085	25,661
Property, plant and equipment:
Land	178,844	182,900	1,529	1,709
Buildings	926,783	925,796	7,921	8,652
Machinery and equipment	2,327,676	2,1g2,038	19,895	20,486
Construction in progress	116,149	92,611	993	866
	3,549,452	3,393,345	30,338	31,713
Less—Accumulated depreciation	2,160,905	2 ,020,g46	18,470	18,887
	1,569,403	1,545,880	13,414	14,448
Other assets:
Intangibles, net	207,034	187,024	1,770	1,748
Goodwill	299,024	283,923	2,556	2,653
Deferred insurance acquisition costs	383,156	374,805	3,275	3,503
Deferred income taxes	178,751	240,396	1,528	2,247
Other	501,438	459,732	4,285	4,297
	1,569,403	1,545,880	13,414	14,448
Total assets	¥10,607,753	¥9,499,100	$90,665	$88,777

1 The rate of ¥117 = U.S. $1, the approximate current rate of exchange at March 31, 2006, has been used throughout for the purpose of presentation of the U.S. dollar amounts in the consolidated financial statements.

2 The rate of ¥107 = U.S. $1, the approximate current rate of exchange at March 31, 2005, has been used throughout for the purpose of presentation of the U.S. dollar amounts in the consolidated financial statements.


	Millions of yen		Thousands of U.S. dollars
Liabilities and shareholders’ equity	2006	2005	20061	20052
Current liabilities:
Short-term borrowings	¥142,530	¥197,765	$1,218,205	$1,848,271
Current portion of long-term debt	163,558	230,285	1,397,932	2,152,196
Notes payable, trade	63,574	67,291	543,367	628,888
Accounts payable, trade	1,037,048	906,248	8,863,658	8,469,608
Accounts payable, other and accrued expenses	411,220	349,009	3,514,701	3,261,766
Accrued income and other taxes	48,725	46,561	416,453	435,150
Advance payments received	144,362	134,326	1,233,863	1,255,383
Other current liabilities	397,953	335,358	3,401,308	3,134,187
Total current liabilities	2,408,970	2,266,843	20,589,487	21,185,449
Long-term liabilities:
Long-term debt	611,430	683,396	5,225,898	6,386,879
Accrued pension and severance costs	474,198	581,598	4,052,974	5,435,495
Other liabilities	72,025	79,361	615,598	741,691
	1,157,653	1,344,355	9,894,470	12,564,065
Minority interest in consolidated subsidiaries	158,325	144,707	1,353,205	1,352,402
Shareholders’ equity:
Common stock:
Authorized—10,000,000,000 shares
Issued:
2006 and 2005—3,219,027,165 shares	274,926	274,926	2,349,795	2,569,402
Additional paid-in capital	285,743	285,736	2,442,248	2,670,430
Retained earnings	570,080	511,185	4,872,479	4,777,430
Accumulated other comprehensive loss	(126,509)	(254,753)	(1,081,274)	(2,380,869)
Treasury stock, at cost:
2006—4,429,347 shares	(2,075)	—	(17,735)	—
2005—3,558,726 shares	—	(1,587)	—	(14,832)
	1,002,165	815,507	8,565,513	7,621,561
Commitments and contingent liabilities
	¥4,727,113	¥4,571,412	$40,402,675	$42,723,477

1 The rate of ¥117 = U.S. $1, the approximate current rate of exchange at March 31, 2006, has been used throughout for the purpose of presentation of the U.S. dollar amounts in the consolidated financial statements.

2 The rate of ¥107 = U.S. $1, the approximate current rate of exchange at March 31, 2005, has been used throughout for the purpose of presentation of the U.S. dollar amounts in the consolidated financial statements.

Consolidated Statements of Income

Toshiba Corporation and Subsidiaries – For the years ended March 31, 2006 and 2005
	Millions of yen		Thousands of U.S. dollars
	2006	2005	20061	20052
Sales and other income:
Net sales	¥6,343,506	¥5,836,139	$54,218,000	$54,543,355
Subsidy received on return of substitutional portion of Employees’ Pension Fund Plan, net of settlement loss of 5,045 million ($43,120 thousand) in 2006 and 7,992 million in 2005	4,085	4,836	34,915	45,196
Interest and dividends	13,485	10,564	115,256	98,729
Equity in earnings of affiliates	—	665	—	6,215
Other income	49,605	58,156	423,974	543,514
	6,410,681	5,910,360	54,792,145	55,237,009
Costs and expenses:
Cost of sales	4,659,795	4,296,572	39,827,308	40,154,879
Selling general and administrative	1,447,186	1,389,596	12,369,111	12,986,878
Interest	24,601	21,749	210,265	203,262
Equity in losses of affiliates	4,452	—	38,051	—
Other expense	96,470	91,211	824,530	852,439
	6,232,504	5,799,128	53,269,265	54,197,458
Income before income taxes and minority interest	178,177	111,232	1,522,880	1,039,551
Income taxes:
Current	57,051	50,419	487,615	471,206
Deferred	33,091	5,525	282,829	51,635
	90,142	55,944	770,444	522,841
Income before minority interest	88,035	55,288	752,436	516,710
Minority interest in income of consolidated subsidiaries	9,849	9,247	84,180	86,420
Net Income	¥78,816	¥46,041	$668,256	$430,290
Basic net income per share	¥24.32	¥14.32	$0.21	$0.134
Diluted net income per share	¥22.44	¥13.53	$0.19	$0.126
Cash dividends per share	¥6.50	¥5.00	$0.06	$0.047

1 The rate of ¥117 = U.S. $1, the approximate current rate of exchange at March 31, 2006, has been used throughout for the purpose of presentation of the U.S. dollar amounts in the consolidated financial statements.

2 The rate of ¥107 = U.S. $1, the approximate current rate of exchange at March 31, 2005, has been used throughout for the purpose of presentation of the U.S. dollar amounts in the consolidated financial statements.

Exhibit 4: United States Consumer Electronics Market, 2001–2006 (in $millions)


	2001	2004	2005	2006 *
Total home video	16,400	20,999	22,552	25,162
Flat TV	217	3,926	7,307	11,133
DVD players/recorders	2,097	2,183	1,679	1,560
Total audio	5,726	5,671	7,266	7,699
Portable MP3 players	100	1,289	3,754	4,420
Total mobile electronics	16,799	18,984	22,367	25,137
Mobile phones	8,651	10,538	13,585	16,099
Total home information products	34,923	41,770	45,032	44,881
Personal computers	12,960	18,233	18,215	18,464
Total electronic gaming	9,689	10,512	11,635	14,292
Electronic gaming consoles	3,250	3,162	3,594	5,045
Other	10,467	15,154	17,058	18,228
Total	94,004	113,090	125,910	135,399

* Projection

Home video includes television sets, players, recorders, camcorders, set-top boxes.
Audio includes home and portable audio products.
Mobile electronics includes mobile telephones, navigation devices, and PDAs.
Home information products include PCs, computer software, and digital cameras.
Electronic gaming includes consoles and software.

Source: Consumer Electronics Association

Exhibit 5: Television Display Statistics

Factory Sales of Digital TV Sets and Displays in the United States, 2001–2005


	2001	2002	2003	2004	2005
Average unit price	$1,812	$1,688	$1,590	$1,257	$1,410
Number of units sold (millions)	1.5	2.5	4.1	8.3	12.3
Sales (U.S. $ millions)	$2,648	$4,281	$6,521	$10,420	$17,388

Source: Motion Picture Association Worldwide Market Research & Analysis

DTV Display and HD Display Households (Millions) in the United States, 1999–2006


	1999	2000	2001	2002	2003	2004	2005	2006
TV households	101.9	102.8	106.4	107.6	109	112	113.1	114.7
DTV households	0.1	0.8	2.5	4.9	8.9	14.1	20.9	29.6
HD display households	0.1	0.6	2.1	4.2	7.8	12.6	18.9	27.2
Total households with DTT (HD) tuner			0.1	0.4	1.2	2.8	7.7	15.6
Total pay HD households (DBS + cable)				0.3	0.8	2	3.4	5

Source: Screen Digest

Television Retail Prices in the United States, 2006


	Size	Resolution	Aspect ratio	Price
LCD Flat Panel
Phillips 26PF5321D	26”	720p	16:9	$900
Toshiba 32HLC56	32”	720p	16:9	$1000
Samsung LN-S2652D	26”	1080i	16:9	$1200
Panasonic TC-32LX60	32”	720p	16:9	$1300
LG 37LC2D	37”	720p	16:9	$1700
JVC LT-40X667	40”	720p	16:9	$2000
Sharp Aquos LC-42D62U	42”	1080p	16:9	$2300
Toshiba 42HL196	42”	1080p	16:9	$2300
Sony Bravia KDL-46S2000	46”	1080i	16:9	$3000
Sony Bravia KDL46XBR2	46”	1080p	16:9	$4300
Plasma Flat Panel
HP PL4260N	42”	720p	16:9	$1700
Panasonic TH-37PX60U	37”	720p	16:9	$1800
Hitachi 42HDS69	42”	1080i	16:9	$2000
Toshiba 42HP66	42”	720p	16:9	$2000
LG 50PC3D	50”	720p	16:9	$2800
Samsung HP-S5053	50”	720p	16:9	$3000
Pioneer PDP-6071HD	60”	720p	16:9	$6500
Projection CRT
RCA R52WH77	52”	1080i	16:9	$850
Hitachi 51F59	51”	1080i	16:9	$1000
Samsung HL-S4666W	46”	1080i	16:9	$1500
JVC HD527BP7	52”	720p	16:9	$1800
Sony KDF-55E2000	55”	720p	16:9	$2000
Mitsubishi WD-57731	57”	1080p	16:9	$2600
Toshiba 62HM196	62”	1080p	16:9	$2800
Sony KDS-60A2000	60”	1080p	16:9	$3500
CRT Tube
Toshiba 24AF45	24”	480i	4:3	$256
Sharp 27SC260	27”	480i	4:3	$280
RCA 32V524T	32”	480i	4:3	$380
LG 30FS4D	30”	1080i	16:9	$800
Sony KD-34XBR970	34”	1080i	16:9	$1000

Source: www.bestbuy.com

Source: Genuity

Global TV Market Shares, Second Quarter 2006


LCD TVs, units		All televisions, units		All televisions, revenue
	% market share		% market share		% market share
Sharp	14.5	LG	11.4	Samsung	14.6
Samsung	14.2	Samsung	10.6	Sony	11.0
Sony	13.8	TTE (RCA)	9.0	LG	9.8
Philips	12.4	Philips	7.1	Panasonic	9.5
LG	8.4	Sony	6.3	Philips	8.6
Panasonic	6.0	Others	55.6	Others	46.6
Toshiba	3.4
TTE	2.5
Others	24.8

Source: iSuppli, DisplaySearch

Exhibit 6: DVD Player Statistics

U.S. DVD Sales and Adoption, 2001–2005


	2001	2002	2003	2004	2005
DVD players shipped to dealers (millions)	12.7	17.1	22.0	20.0	16.1
Installed consumer base (millions)	31.4	56.5	90.2	127.3	164.0
Average DVD player price (USD)	$153	$136	$103	$90	$73
DVD software units shipped to dealers, including sell-through and rental (millions)	364	685	1,023	1,518	1,657
Titles available on DVD, including movies and music videos	13,000	20,000	29,000	40,000	45,000

Source: Motion Picture Association Worldwide Market Research & Analysis

DVD Player Retail Prices in the United States, 2006


Name	Type	Price
RCA DRC200N	standard	$34
Toshiba SD-3990	standard	$50
Philips DVP3040	standard	$50
Panasonic DVD-S1	standard	$60
Sony DVP-NS55P	standard	$70
Philips DVP5960/37	HD upconversion	$82
Toshiba SD-4990	HD upconversion	$90
Samsung DVD-HD860	HD upconversion	$100
Sony DVP-NS75H	HD upconversion	$130
LG DN191H	HD upconversion	$123
Toshiba HD-A1	HD DVD	$500
Sony BDP-S1	Blu-ray	$1000
Samsung BD-P1000	Blu-ray	$1000

Source: www.bestbuy.com

DVD Player Market Shares in the United States, 2002–2005


	2002	2003	2004	2005*
Sony	21.5	21.9	22	18.5
Cyberhome		2.1	7.5	11.5
Toshiba	10.2	11.1	9.5	9.4
Samsung	11.6	7.9	9.4	8.5
Philips/Magnavox	5.1	6.4	4.8	5.3
Panasonic/Technics	10.3	7.7	5.9	4.5
Sylvania	2.9	2.9	4.3	4.4
Memorex		1.5	2.8	3.9
JVC	6.5	6.4	4.9	3.5
Zenith	1.9	3.4	3.6	2.8
Apex	5.2	4.1	3	1.3
Others	24.8	24.6	22.3	26.4

*Through July 2005

Source: Screen Digest

DVD Player Market Shares in Western Europe, 2002–2005


	2002	2003	2004	2005*
Philips	11.5	11.5	13.3	13.5
Sony	11.8	9.9	9.8	7.6
Samsung	7.6	7.5	7.6	5.9
LG	4.5	5.3	5.1	4.7
Amstrad				3.8
Panasonic/Technics	6	5.7	4.6	3.4
Shenzhen Electronics Group				3.4
JVC	4.9	4.8	4.6	3.2
Toshiba	4.6	3.6	2.6	2.7
Cyberhome				2.6
GVG Digital Technology				2.2
DK Digital				2.2
Thomson	3.3	4.2	2.9	2.1
Pioneer	6.7	3.9	2.5	1.7
Daewoo				1.7
Others	39.1	43.6	47	39.3

*Through July 2005

Source: Screen Digest

Exhibit 7: Base Share of 128-Bit Videogame Consoles, Worldwide, 2000–2004


	2000	2001	2002	2003	2004
Sega Dreamcast	54	25	13	9	7
Sony PlayStation	46	63	64	63	62
Nintendo GameCube		7	12	14	15
Microsoft Xbox		5	11	13	16

Source: Screen Digest Games Intelligence

Exhibit 8: PC and Internet Sales and Usage

PC Ownership in the United States, 2001–2005


	PC households (millions)	PC penetration rate (% of US households)
2005	73.7	65.6
2004	70.2	63.0
2003	65.9	59.7
2002	62.2	56.9
2001	57.4	53.0

Source: Motion Picture Association Worldwide Market Research & Analysis

U.S. Households with Internet Access, 2001–2005


	Internet households (millions)	Internet households as % of PC households	Internet households as % of total US households	Broadband households (millions)	Broadband households as % of internet households	Broadband households as % of total US households
2005	70.7	95.9%	63.0%	36.3	49.3%	32.3%
2004	65.1	88.0	58.5	28.8	41.0	25.9
2003	59.6	81.0	54.0	26.1	39.6	23.7
2002	55.4	75.0	50.7	15.9	25.6	14.5
2001	50.9	69.0	47.0	10.9	19.0	10.1

Source: Motion Picture Association Worldwide Market Research & Analysis

Computer Usage Habits in the United States in 2005

Respondents reporting using a home computer at least once per month for various activities:


Play video games	57%
Play music files (on PC)	51%
Burn/create CDs or DVDs	46%
Edit digital photos	45%
Play DVDs (on PC)	29%
Create digital photo slide shows	21%
Watch TV	10%
Edit videos	8%
Record TV shows	7%

Source: Parks Associates

Worldwide PC Shipments, Unit Market Shares (in percentages of total), 2000–2005


	2000	2001	2002	2003	2004	2005*
Hewlett-Packard	7.2	21.2	19	15.7	16.1	15.9
Dell	8	8.9	9.4	8.9	10.6	11.4
Acer		3.8	4.4	5.4	7.1	8.9
Fujitsu Siemens	9.4	7.5	7.1	6.3	6.8	7.4
IBM-Lenovo	6.9	5.8	5	4.4	5	4
Others	68.5	52.8	55.1	59.3	54.4	52.4

*through September 2005

Source: Gartner\IDC

Exhibit 9: Movie Studio and Home Video Statistics

Movie Studio Revenues; in 2003 Dollars ($billions)


	Theater revenues	Video/DVD revenues	Pay-TV revenues	Free TV revenues	Total	Theater share (%)
1948	6.9	0	0	0	6.9	100
1980	4.40	0.20	0.38	3.26	8.31	55
1985	2.96	2.34	1.04	5.59	11.90	25
1990	4.90	5.87	1.62	7.41	19.79	22
1995	5.57	10.60	2.34	7.92	26.53	20
2000	5.87	11.67	3.12	10.75	31.41	19.5
2003	7.48	18.90	5.56	11.40	41.20	17.9

Source: Edward Jay Epstein analysis of MPA data

Average Motion Picture Costs, 1995–2005 (in $millions)


	Average negative cost per feature*	Average advertising cost per feature
2005	$60.0	$36.19
2004	62.4	34.35
2003	63.8	39.05
2002	58.8	30.62
2001	47.7	31.01
2000	54.8	17.74
1995	36.4	6.45

*Including production, studio overhead, and capitalized interest

Source: Motion Picture Association Worldwide Market Research & Analysis

Number of U.S. Films Produced and Released to Theaters, 1995–2005


	Number produced	Number released
2005	699	549
2004	611	528
2003	593	473
2002	543	466
2001	611	483
2000	683	478
1999	758	461
1998	686	509
1997	767	510
1996	735	471
1995	637	411

Source: Motion Picture Association Worldwide Market Research & Analysis

Sales of DVDs to U.S. Dealers, 2001–2005 (Millions of Units)


	Rental DVDs	Sell-through DVDs	Total
2005	178.4	1,114.2	1,292.6
2004	149.1	1,063.2	1,212.3
2003	110.9	768.2	879.1
2002	79.3	539.9	619.2
2001	37.1	313.9	351.0

Source: Motion Picture Association Worldwide Market Research & Analysis

Top-Selling DVD and VHS Home Videos in the United States, 2005


Rank	Title	Distributor	Box office (USD millions)	Units sold (millions)
1	The Incredibles	Disney/Pixar	$261.4	17.44
2	Star Wars: Episode III	Fox	380.3	10.73
3	Madagascar	DreamWorks	193.1	10.28
4	Shark Tale	DreamWorks	160.8	10.06
5	The Polar Express	Warner Bros.	173.2	8.50
6	Meet the Fockers	Universal	279.2	7.31
7	National Treasure	BV/Disney	173.0	7.20
8	Cinderella	BV/Disney	N/A*	6.86
9	Batman Begins	Warner Bros.	205.3	6.42
10	Ray	Universal	75.3	6.11
11	Mr. & Mrs. Smith	Fox	186.3	6.02
12	Charlie and the Chocolate Factory	Warner Bros.	206.4	5.81
13	War of the Worlds	DreamWorks	234.3	5.42
14	Bambi	BV/Disney	102.8	5.39
15	The Notebook	New Line	81.0	5.16
16	Robots	Fox	128.2	5.12
17	Troy	Warner Bros.	133.2	4.89
18	The 40-Year-Old Virgin	Universal	109.1	4.71
19	Napoleon Dynamite	Fox	44.5	4.70
20	Fantastic Four	Fox	154.7	4.61

*re-release

Source: Motion Picture Association Worldwide Market Research & Analysis

Exhibit 10: U.S. Cable and Satellite Subscriptions, 2000–2005 (in millions)


	TV households	Basic cable households	Pay cable households	Digital cable households	Satellite households
2005	110.2	73.2	34.0	29.9	22.3
2004	109.6	73.9	35.1	27.7	22.2
2003	108.4	73.9	40.0	24.5	19.4
2002	106.7	72.2	34.4	21.3	17.6
2001	105.5	73.2	34.1	16.9	12.9
2000	102.2	69.5	33.7	10.0	9.6

Source: Motion Picture Association Worldwide Market Research & Analysis

This case study is provided in this Sage Business collection primarily as a basis for classroom discussion or self-study and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case study is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

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Sony vs Toshiba: The Fog of a Format War Obscured a Complicated High Definition Landscape

Case

Teaching Notes

Supplementary Resources

Abstract

Resources

Exhibit 1: Sony Corporation Financials, 2005–2006 Consolidated Balance Sheets

Sony Corporation and Consolidated Subsidiaries – March 31

Consolidated Statements of Income

Exhibit 2: CD Percentage of Music Sales, 1989, 1991, 1993–2005

Exhibit 3: Toshiba Corporation Financials, 2005–2006 Consolidated Balance Sheets

Toshiba Corporation and Subsidiaries – As of March 31, 2006 and 2005

Consolidated Statements of Income

Exhibit 4: United States Consumer Electronics Market, 2001–2006 (in $millions)

Exhibit 5: Television Display Statistics

Factory Sales of Digital TV Sets and Displays in the United States, 2001–2005

DTV Display and HD Display Households (Millions) in the United States, 1999–2006

Television Retail Prices in the United States, 2006

Global TV Market Shares, Second Quarter 2006

Exhibit 6: DVD Player Statistics

U.S. DVD Sales and Adoption, 2001–2005

DVD Player Retail Prices in the United States, 2006

DVD Player Market Shares in the United States, 2002–2005

DVD Player Market Shares in Western Europe, 2002–2005

Exhibit 7: Base Share of 128-Bit Videogame Consoles, Worldwide, 2000–2004

Exhibit 8: PC and Internet Sales and Usage

PC Ownership in the United States, 2001–2005

U.S. Households with Internet Access, 2001–2005

Computer Usage Habits in the United States in 2005

Worldwide PC Shipments, Unit Market Shares (in percentages of total), 2000–2005

Exhibit 9: Movie Studio and Home Video Statistics

Movie Studio Revenues; in 2003 Dollars ($billions)

Average Motion Picture Costs, 1995–2005 (in $millions)

Number of U.S. Films Produced and Released to Theaters, 1995–2005

Sales of DVDs to U.S. Dealers, 2001–2005 (Millions of Units)

Top-Selling DVD and VHS Home Videos in the United States, 2005

Exhibit 10: U.S. Cable and Satellite Subscriptions, 2000–2005 (in millions)

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