How to Lose Standards War Gracefully
Well, the war's over.
The HD-DVD vs Blu-ray war, I mean.
Toshiba, in a Wall Street Journal article (sub. required) ceded the market for next generation DVD players to Sony and its allies. The CEO, Atsutoshi Nshida delivered this news in a press conference in Tokyo:
- Cease production of the HD DVD players immediately
- End the business by the end of March
- Invest $15.7 billion in next generation flash-memory
That last bullet – investing big in another market is key to taking the sting out of the news. The HD DVD format wars, reminiscent of the VHS-Beta wars of the 1980s, was slowing consumer purchases by causing confusion and incompatibilities. The final straw came when the last holdout studio told Toshiba that there weren't going to release HD DVDs in that format anymore. Retailers such as Best Buy and WalMart supported Blu-ray from the get-go hoping to get to the end of the wars sooner.
As hard as it is to concede defeat, the announcement to invest so much in an emerging market is huge and the news was well received by investors who moved the stock 5% higher.
So, the lesson is, if you are losing a battle and see no chance of victory, announce decisive departure and massive investment in an emerging market simultaneously.
Of course, this doesn't really apply to all markets – so far just consumer markets. Enterprise markets are a lot more sensitive to complete departures (see 3Com and 'Catapult'). But, I bet it would make a lot more sense to do this kind of strategic, obvious and disciplined retreat from time to time. Limping along, ignoring the realities would only cost lots of people time, credibility and money. Good for Toshiba.
One day later, I see that Sony and Toshiba announced a plan to jointly develop and manufacture chips for consumer products. I bet this was part of the way Sony helped Toshiba make their exit quickly.
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