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Blu-Ray vs HD-DVD Case Study: Online mind sharing tell the consumer side of “the stalemate” story

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Consumer generated media (CGM) is providing marketing professionals tools to better understand consumer mindset and behavior. I have attached below a case study conducted by our senior research officer Ofer Friedman and myself, in which CGM analysis is used to understand consumer behavior and mindset in regards to the high definition format war between blu-ray and hd-dvd.

Martin Fuchs

1st2c market analyst/planner

It happens once in decades. A new digital storage format is introduced, taking consumer entertainment to a whole new level of audio-visual experience. A new format ends up changing how information and entertainment are produced, played and stored, and that is a big odds game with huge business implications.

When new generations of computer micro-processors are introduced it would typically be two competing products launched almost simultaneously by Intel and AMD. In the micro-processor case consumer choice is relatively easy because both play all programs with little performance differences. By contrast, consumers have always needed to decide between alternative digital storage formats since developers typically secured exclusivity for their format with hardware (player) makers and content producers. In the early 80s it was JVC’s VHS vs Sony’s Betamax. If you had a VHS player you couldn’t play videos that were available in Betamax format and vice versa. This meant that consumers “voted with their wallet” in favor of one of the formats (thus encouraging content producers to channel product variety to that format). Investing in a new player meant risking choice of a player with inferior content variety. That is why new format generations trigger a “format war” as developing companies make every effort to drive decisive consumer patronage of their format.

This time, at the age of high-definition, it’s Sony’s Blu-Ray vs Toshiba’s HD-DVD optical disk format. The “war of high-definition formats” has been waging for almost two years now. Both Sony and Toshiba invested heavily in marketing, sales promotions, and strategic alliances with content providers (such as with movie studios). But as the 2007 holiday season is nearing, the “war of formats” is at what has already been labeled as “the stalemate“.

1st2c has looked into the consumer side of “the stalemate” and discovered that online mind-sharing provides a surprisingly accurate diagnostics of the dynamics of the “war of formats”. 1st2c Online Strategizing Research© discovered a much more cluttered consumer worldview and saw an underlying uncertainty about the future of digital storage as a whole. Emerging market dynamics suggests a need for new models for positioning and marketing of high definition players.
More than “another” war of formats

How consumers react to the two formats? What drives their attention? Why marketing initiatives delivered only short term impact? These questions are being answered by hundreds of thousands of involved consumers engaged in online mind-sharing.

1st2c’s deep web monitor provides visceral understanding of the dynamics of the unfolding “war of formats”.

Table 1: Trendline of Online Resonance on DVD vs “HD-DVD” and “Blu-Ray”

(Last 12 months)

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Perhaps the immediate striking insight is embedded in the evident continuous decline in attention to the DVD format as a whole, while at the same time attention to the new Blu-Ray and HD-DVD format is increasing only mildly and inconsistently. In other words, consumer engagement with the whole issue of optical disk format is eroding!

Deep diving into the networked market suggests that consumer choice mindset is not necessarily limited to Blu-Ray or HD-DVD. Active consumer mindset is far broader in encompassing additional types of solutions to the same core (content consumption and ownership) needs!

From our analysis, Blu-Ray and HD-DVD are actually in competition not only with each other (for example, IP-based solutions are gaining popularity also among less techy consumers) and this increases consumers’ perceived risk in choosing either.

 

Focusing on the “war of formats” between Blu-Ray and HD-DVD, the state of shoulder to shoulder competition is evident. The striking similarity in trendlines of resonance between the two focal formats is typical to an undecided market. In such situations consumers tend to discuss the respective merits of alternative offerings against any relevant market development.

Old marketing models may need rethinking

There is a deeper layer of insights embedded in online consumer resonance.

Table 2: Critical events Influencing Online Resonance on “HD-DVD” and “Blu-Ray”

(Last 12 months)

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Throughout the last period content-based initiatives drove surges in attention but didn’t create decisive attention superiority to the respective format. This is visible for instance with Blockbuster’s alignment with Blu-Ray (June 18), Paramount and DreamWorks alignment with HD-DVD (August 21), and the release of the Transformers movie on HD-DVD (October 16-24).

But something happened to the long standing “stalemate” in November. Online mind-sharing tells the story of a shake up in consumer mindset caused by big retailer competition. In late October Walmart, Circuit City and Amazon lowered the price tag for Toshiba’s HD-A2 HD-DVD player to $198 triggering surges in consumer talk, with notable advantage to HD-DVD.

Immediately thereafter, on November 1st, Walmart and Best Buy announced special sales promotion initiatives that dropped the price to $99. This time consumer resonance on HD-DVD rocketed leaving Blu-Ray far behind. For the first time in (at least) a year “the stalemate” was broken.

Is it the beginning of a momentum or just a short term achievement for HD-DVD? A lot has to do with how marketers play their cards in the holiday season. But chattering consumers did provide a significant insight: So far, price-based leverages delivered better competitive differentiation than content-based leverages, at least in terms of consumer engagement.
The takeaways are clear and powerful.

Significant price cuts drive consumer action. There’s no surprise about that. But when a net active audience is concerned, especially an intensively networking audience, online resonance is both a critical market undercurrents gauge and a powerful influence channel.

What this deep dive into the networked marketplace suggests is examining the merits of “foot in the door” marketing strategies that motivate shift from “shopping” to “impulse” purchase behavior and leveraging them to drive a stalemate breaking mental shift.
1st2c in a nutshell

1st2c is the home of Online Strategizing Research© – the most comprehensive end-to-end methodology available for the networked market. Strategizing Research©‘s is strongly insight and opportunity orientated that creates a vivid picture of mindsets and behaviors of the networked marketplace and adds new dimensions to both online and offline strategies.

1st2c works with Fortune 500 companies on adding new dimensions to overall marketing strategy and on monitoring and engaging the networked market.

Ofer Friedman

Chief Research and Client Officer, 1st2c

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