Monday, January 14, 2008

Fixing the HD DVD v Blu-Ray Dilemma With A Guarantee

So, the HD DVD vs. Blu-Ray wars continue and but for the early adopters, there is little adoption of either format. The problem is that customers don't want to bet on the wrong format like they did (or heard people did) in Beta-VHS wars. And until there is significant adoption of either format, there is no way to know which format is winning. A chicken and egg problem.

I would like to suggest a solution - the main problem is that customers don't want to spend 100s (or even 1000s) of dollars on buying content that becomes worthless if their format looses. The solution would be as follows and for ease, I propose the solution from HD DVD perspective:

Offer to replace for free all HD DVDs if at any time in the next 5 years, the market share of HD DVD falls below 10%.

But how will this work? Who will pay for it?
  • The increased adoption in the near term should deliver sufficient profits for the sellers of HD DVDs who can set aside a small %-age of the revenues to pay for the replacement, if it comes to that.
  • This bet is even more lucrative for the format that has a higher potential of winning (HD DVD?). They could accelerate the adoption and it would be hard for the loosing format (Blu-Ray) to offer the same guarantee.
  • To keep costs low, HD DVD vendors could offer the guarantee for an additional fee ($1) or conversely bundle it in cost and offer discount if you don't buy the guarantee.
  • Alternatively, there could be a small fee of say $1 or 2 to cover the cost of converting content from one format to another.
  • None of this solves the sunk cost of the player but that is smaller concern for customers than the cost of DVDs.
What do you think? Would you go out and buy HD DVDs if such a guarantee were offered?

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