The recent hot news on consumer electronics is the victory of the Sony Blu-ray format over the Toshiba HD DVD format in high-definition DVD. Now that Sony Blu-ray has dominated the market, what should be its business strategy? Harvard Business is hosting a discussion on the topic and the leading article is Winning the DVD Battle but Losing the Innovation War. If you are interested, please take a look at the article and the ensuing discussion.
Sony’s victory is a textbook example of good marketing strategy. Gained from the painful experience of the failure of its Betamax videotape format, which was a better technology but not supported by marketing effort in the video rental business, Sony worked hard this time to align with major movie studios and also packaged its PlayStation 3 video game console with Blu-ray technology at a higher cost. Its effort finally paid off.
However, there was criticism that Sony wasted too much resources on Blu-ray while it should not lose sight of the emerging high-definition video sources from the Internet. This kicks off the debate on the competitive environment of the high-definition video industry. Some experts brought out the Michael Porter Competitive Forces model for analysis.
The lead article points out that innovation is a multi-front contest. Focusing on the mainstream and the high end is insufficient. Winning the innovation war requires mastering the ability to counter threats emerging in the low-end of existing markets and to seize opportunities in new markets. In this respect, the discussion targets on the development of the Internet-based content delivery services. Although there is consumer demand on the very best quality DVD technology, the proliferation of Internet-delivered video shows that there are many consumers who are willing to trade off picture quality for convenience and low prices.
People are debating whether the competitors from the Internet are new entrants to the market and substitute products. Some argue that the present ability of the Internet in terms of bandwidth is insufficient to deliver high-definition video as a substitute to Blu-ray. Also, there is still no convenient storage devices which could compare to the 50 GB DVD. As such, these service providers will not enter the high-definition video discs market as a competitive force.
However, there are more optimistic people who have confidence that the Internet will very quickly evolve to be an effective carrier of large high-definition video files with sufficient bandwidth for streaming. Many companies such as Apple, Comcast, Netflix, Cisco, Motorola and many others are competing to improve the ability to download movies over the Internet. The winners could be those which could develop new business models that make it simple, easy, and cheap to obtain such content. For storage, Europe SKY is now broadcasting in high-definition and customers can get a satellite tuner that allows recording of movies to their hard disks. Furthermore, there are now portable devices made by Archos, Creative and some hard disk manufacturers which could offer convenient storage of over 100GB. For the limitation of the Internet bandwidth, many technologists have devised high quality file compression programs to help transfer large files.
Sony has done everything right in the Blu-ray battle. But it could face long-term trouble if it allows its Blue-ray strategy distract it from addressing disruptive development in the video delivery market. It must be prepared for any change in its competitive environment.