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The 90nm Cell/B.E. package as found in the PlayStation 3, now to be manufactured by Toshiba.  (Source: DailyTech)
Sony gives Toshiba something in return for its troubles -- Japanese Cell chip plants for $835M

A new twist has emerged with the death of HD DVD.  After Warner, Best Buy, Walmart and Netflix jumped on the Blu bandwagon, the fate of HD DVD was already sealed.

Despite the grim news, the principal HD DVD developer, Toshiba Corporation, refused to initially comment on its plans for its HD DVD.  However, as many analysts predicted, Toshiba came out last week and officially surrendered to Blu-ray

Many saw Toshiba's willingness to give up on HD DVD as a logical business decision and perhaps an admission of Blu-ray's superiority.  However, there might be a little more to the story.  Reuters reports that on Wednesday Toshiba and Sony Corporation, one of Blu-ray's principal developers, agreed to a major business deal, reached just after Toshiba made its final HD DVD decision.

Sony agreed to sell it microchip processing facilities in western Japan for approximately $835M USD.  These facilities currently produce Cell processors and RSX graphic chips.  Toshiba will enter the joint venture with Sony on April 1, 2008.

Toshiba, IBM and Sony were the principal developers of the Cell microprocessor, but Toshiba previously showed little interest in using the chip for any of its own projects.  Sony touts the Cell broadband engine in its Playstation 3 consoles; IBM uses the Cell processor in high performance computing clusters.  Toshiba has vowed to now use the Cell in its upcoming products.

While Toshiba and Sony entered into talks back in October 2007 and reached a tentative agreement to sell the cell facilities, the two companies continued to haggle about the price.  Sony's concession of what is considered a favorable price for Toshiba will likely strike many following Toshiba's drop as HD DVD as more than a coincidence, and perhaps a sign of an informal agreement.

The other interesting aspect of the move is that it indicates a clear shift by Toshiba to back the PS3.  The PS3, which last month outsold Microsoft's Xbox 360, previously had few ties to the company; while Microsoft's number one ally in hardware manufacturing has always been Toshiba.  Toshiba manufacturers several components for the Xbox 360, including the HD DVD add-on, and the Microsoft Zune MP3 players.

Toshiba's flip-flop may have been in the cards for a while.  Microsoft showed little remose as HD DVD took second place to Blu-ray; a move Toshiba must have recognized from its American ally.  Now the solidified PS3 venture between Sony and Toshiba indicates that Toshiba now has switched to backing the PS3 almost exclusively, another victory for Sony.

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RE: Business is complex.
By Disenchanted on 2/23/2008 6:27:40 PM , Rating: 2
Points 1 and 4 are the same essentially: more time. Points 2 and 3 are the same essentially: same features/price points for both consoles. Am I the only one who thinks that Blu-ray didn't win because it was bundled in a console, but rather, because said console was the lowest priced Blu-ray player?

A console selling at a loss to the manufacturer is a model that has been used successfully for years. By choosing BD-ROM as the format for the PS3, Sony basically designed a first generation BD player with a street price of $600 instead of $1,000.

I seem to remember a lot of people getting pretty annoyed with Sony for putting the BD drive in the PS3 because of the fact that it would raise the price so much. I think the same would have happened with Microsoft if they had put the an HD DVD drive in the 360.

IMHO then, the only advantage would have been time. As it is, the 360 launched in North America 1 year (minus 5 days) before the PS3. If (according to the hypothetical in your post) it were released in 2006, Microsoft would have lost at the very least just over a crucial holiday month (assuming a Jan. 1 launch), it likely would have been much more than that. What you're considering time gained, can also be looked at as time lost, since, if we were to assume the 360 ans PS3 went head to head on launch day, Microsoft would have lost out on ~10 million sales from the first year lead it had on the PS3. Look at the sales data. If that were the case, the PS3 would already be #2 in the rankings.

And that brings me to my last point which is: Mass market penetration is what matters here. It's why HD DVD didn't win, even more than the fact that the BD format is "technologically superior", mass market is where it's at. Now you can blame HD DVD's death on marketing if you like, or business deals, or even the color of the cases, but I think if Microsoft had put HD DVD drives in the 360, it would have died even faster because of the price point issue. That's actually what surprised me was that the price point was so much better on HD DVD that I thought it would have hit the mainstream faster than it (almost?) did.

And finally, this is a great deal for both parties, since they will undoubtedly make gobs of money from this in the next several years, and they will need that money to continue to back this new format. I think the change to Blu-ray will happen, but now we need to work on interesting the rest of the world, aka, the non-geeks who have not adopted high-def as the way to view content. Remember, we are not the norm, and not everyone understands these "newfangled contraptions".


RE: Business is complex.
By xsilver on 2/24/2008 2:32:06 AM , Rating: 2
i dont think you're quite right there.

My thinking is that the format war in this instance was favoured towards BD because it could never really die. This is because it was intergrated with the PS3 so even if all the movie studios pulled to hd-dvd BD media would still be used for ps3 games. Sony wouldnt have been happy with that but they would ride it out like they are doing with memory stick.

Had hd-dvd been intergrated with the xbox 360 I would thoerize that eventually we would come to maket saturation such that there would be dual format players everywhere and essentially end up in stalemate. As long as each side has one major studio, backed by license agreements or whatever; it would be fine.
Essentially hd-dvd bet the house and they lost.
BD however would have never given up ps3 penetration no matter what.
The fault of that being up to microsoft or toshiba however is open to debate.

"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein

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