Toshiba’s Dirty Pool

Man is it a doozie.

Toshiba has made the rather risky decision to license their HD DVD technology to Chinese manufacturers. As anyone who owns a DVD player that cost less than 100$ is aware, the Chinese are getting good at cranking out cheap home video equipment in quantities so massive that it drives prices downward for the whole market.

The reason why this is such a risky move for Toshiba is that Toshiba is dropping exclusivity on the HD DVD product line before it’s even hit the shelves. This could mean a hit to Toshiba’s bottom line, and the bottom line of other electronics makers outside of China. Toshiba is operating under the hope that this maneuver of theirs could potentially win consumer markets to the HD DVD format, forcing the studios to come play ball with Toshiba once more. Toshiba’s goal now is to get HD DVD players into every Wal-mart in America and sell them for less money than a PS3 will cost. If they can undercut the PS3 they might have a shot at winning the format war.

This seems like a really huge gamble to me. Toshiba is risking everything to get this product to market. It’s wonderful because Toshiba really believes in their product and is willing to do what it takes to get it on the shelves, not to mention being ruthless out of some need for justification of the millions of dollars spent on developing the new format. It’s also not so good for business IMO. If the Chinese vendors don’t pay their licensing fees on the tech, Toshiba doesn’t get a positive return on this deal.