Lentis/Media Format Wars

Historically, format wars have emerged in the technology industry between differing types of media and mutually incompatible proprietary formats competing for the same market. In many of these wars, participants have used different political, economic, and marketing strategies to draw consumers to their side. This chapter focuses on the social strategies used by participants in attempts to win the wars, focusing on a common theme of the bandwagon effect as an early indicator of the winning side. Sony, a major electronic product producer, is a company which has been through many such wars serves as the major participant focus for this chapter.

Sony make.believe logo

Betamax vs VHS

Overview

Beta Max Tape

The first video cassette recorder (VCR) to become available to the public was the U-matic system, released in September 1971, it was designed to appeal to the masses. However, its high cost and user-unfriendliness deterred would-be consumers. In 1975, Sony released the Betamax to the public as a high quality, consumer-grade VCR. Sony had the VCR market to itself, owning 100% of the market share and selling 30,000 Betamax in a year. However, in 1976 JVC released its own format, the VHS. The two incompatible format systems started the videotape format war as both Sony and JVC competed for market dominance.

Factors of the War

Although VHS' lower price was a factor, the main factor that controlled the videotape war was recording time. The initial Betamax video recorder could only record approximately 60 minutes of content, whereas the initial VHS could record two times as much content. Although the technology existed to increase the recording time of the Betamax, doing so would drastically decrease the picture and sound quality of the video. Initially, both Sony and JVC were unwilling to make this compromise. However, JVC reacted quickly to the high consumer demand, producing a VHS that could record upwards of 4 hours of video and sound content. Consumers preferred the longer recording time over the quality of the Betamax, and consumers started to flock towards the VHS. Although Sony attempted to win back the market by increasing the record time of the Betamax, their firm grasp on the video market had been lost. This cascading effect of customer movement signaled the end of the war and VHS as the victor.

VHS Success

Betamax initially owned 100% of the market in 1975. The perceived value of longer recording times eventually tipped the balance in favor of VHS, and in the 1980s, Sony’s Betamax started to become gradually replaced by the VHS format. As movie and video studios turned away from Betamax, the combination of lower market share and a lack of available titles strengthened VHS's hand. With the rise of VHS came the demand of pre-recorded tapes, setting off another bandwagon in the 1980s as retailersstocked up on the format. This ultimately led to the decline of Betamax as stores and producers started to completely dropped the format.

Memory Stick vs SD Card

Overview

Memory Stick 64MB

In the early 1990s, technological innovations led to the desire for technology to be smaller and more portable. This was especially evident in the portable electronics market, which required small memory cards to store data. As differing memory card formats were developed by competing companies, the industry entered a format war on which flash memory stick would be the industry standard. First launched in 1995, SmartMedia was an early leader in the war. However, SD (Secure Digital) soon took over SmartMedia’s share of the market. In 1998, Sony first entered the market with the advent of Memory Stick and became a major player by the early 2000's. This success partially came from a vendor lock-in strategy Sony employed, where all their releases would only support the Memory Stick. Despite of this, the SD format proved to be more popular, as electronic producers opted to designed their products to store information on an SD card. As a result, Sony saw Memory Stick's role diminish, its use largely only in Sony products. The format war unofficially ended in 2010, when Sony announced that their products would also enable SD card support along side Memory Stick. Industry reporters viewed this as Sony waving a white flag of surrender while the announcement declared that it was to "provide the consumers with choice.".

Bandwagon Effect

As with the other cases, the bandwagon effect was a main factor when determining the winner of the war. While both SD cards and Memory Sticks were popular, the tide soon turned. Companies, such as Sony Ericsson, that supported Memory Stick only saw the market favoring SD cards and gradually switched over. With SD card's popularity, Sony was risking harming their other products by continuing to try to prop up their failing Memory Sticks. Thus they had to give up on the Memory Stick in order to prevent the bandwagon effect from harming their products in other areas.

Rebellion Effect

While the bandwagon effect helps to explain the end of the war, the rebellion effect explains how the bandwagon effect was triggered. From a technological standpoint, while the Memory Stick did fall behind the SD card in later years, the Memory Stick was initially equivalent to the SD cards in specs. Thus, the question arises, what caused people to choose SD cards over the Sony Memory Stick? The rebellion effect describe the following trend: when people are naturally restricted to an option, they instinctively form negative feelings about that option. Sony applied the vendor lock-in strategy to all of their electronic merchandise, forcing their devices to only allow support Memory Sticks. This lack of choice caused a major backlash from consumers as they protested the choice forced upon them. On Sony camera products, some reviewers would even list the Memory Stick storage support as a con. The vendor lock-in strtegy backfired on Sony due to the rebellion effect.

BluRay vs HD DVD

Overview

IFA 2005 Panasonic Blu-ray Disc Single Layer 25 GB BD-RE (LM-BRM25) (Cartridge)

Blu-ray was first seen in 2000 as an early prototype, and had its first official release in 2006. HD DVDs were also released in mid-2006 well into the media format war. The primary participants in this conflict were the Blu-ray Disc Association and the DVD Forum. Both associations comprised various movie studios, electronics manufacturers, and research groups. These primary participants were interested in seeing the advancement of their format as the dominant format, and used varying strategies to push their format as the industry standard.

Compromise

Support for the two formats was initially mutually exclusive. Many consumers were deterred from purchasing devices supporting either format due to the format war; choosing the device of the losing format would render the device obsolete. The DVD Forum and the Blu-ray Disc Association attempted to reach a compromise in 2005 to mitigate the issue. However, the compromise did not succeed as several Blu-ray Disc Association members did not want to risk losing money in royalties, something that had happened in the previous DVD standard. By the end of 2005, the attempt to unify the standards was dead.

Technical Similarities

In technical specifications, Blu-ray and HD DVDs were very similar. Blu-ray had higher capacity for the same disc size and better security, but in all other regards, both formats were very similar technically. Because of this, it was not solely through technical superiority that the Blu-ray format prevailed over the HD DVD format.

Shifting Alliances

Shifting alliances and Sony’s wide reach as an electronics manufacturer led to the Blu-ray's victory in the format war. At the beginning of the format war in late 2005, the six major studios gave exclusive support between the two media formats for various reasons. Over the course of the next few years, the major studios changed which format they would give exclusive support towards. HD DVD gained some support for a period due to lower manufacturing costs. However, due to Sony's market domination, Time Warner announced exclusivity for Blu-ray, Other major studios soon followed and sided with the Blu-ray format. This market domination was seen early on. Blockbuster, a U.S. movie rental company, found that over 70% of their high definition rentals were Blu-ray discs, and consequently exclusively rented out Blu-ray movies.

Sony's PlayStation 3

This market share domination was part of a long strategy of Sony when they added the Blu-ray player to the PlayStation 3. When Toshiba eventually ended the format war with the decision to stop development and manufacturing of HD DVD players and recorders, the PlayStation 3 had sold an estimated 10.5 million consoles worldwide. More than 10 times the estimated 1 million HD DVD players and Xbox 360 console add-on. Because consumers were afraid of choosing a losing standard, they were less likely to purchase a standalone high definition media player. However, by incorporating the Blu-ray player into the PlayStation 3, consumers were given Blu-ray players in addition to the game console they desired.

Bandwagon Effect & Network Effects

Two major effects can be seen in play here: the network effect of the Blu-ray format and the bandwagon effect. Because there were more players available through standalone players and the PlayStation 3, purchasing a Blu-ray media also enabled a consumer to share it with their community and enjoy the media multiple times. Through the bandwagon effect led by Time Warner, the Blu-ray community received more support of the major studios and as a result, more titles available for it’s consumers.

Conclusion

We see that media format wars are too large to be simplified down to one effect. Even with the focus on one company, Sony, we see that multiple effects may be learned from each war. The underlying theme however, shows that the bandwagon effect portends the end of the war, as when individuals notice one side winning, they tend to join the winning side as well leading to the cascading effect. While this chapter focused on how Sony as a company dealt with various wars, there are many other possible areas future authors could look into. The war developing around portable electronics such as e-readers and tablets right now would be a particularly interesting area to expand future chapters into.