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The Blu-Ray player is a media player that is produced and marketed by the Sony Corporation. It was first introduced in Japan in 2000. Over the course of the next several years, the Blu-Ray entered into competition with the DVD, in particular the HD DVD that was championed by rival Toshiba. In early 2008, Toshiba announced that it was going to discontinue the HD DVD, effectively ceding the market for movie playing formats to Sony (Toshiba, 2008). The two products were competing as digital video formats for playing movies and television shows in particular. The result of this move is that the Blu-Ray was expected to be the dominant format for this service offering. That has not come to pass, and this paper will seek to explain why, from a marketing perspective.
There is a brief note to be made about the historical context. Sony engaged in a similar battle before with the Betamax player for movies in the late 1970s and early 1980s. This format competed with the open-source VHS format. Although Betamax was considered to be technologically superior, Sony's insistence on controlling the technology led it to lose this battle. The Blu-Ray vs. HD DVD conflict mirrored that competition. It was expected that if the superior format won this time (Blu-Ray is considered to be superior) that Sony would enjoy success.
Blu-Ray After 2008
From a product perspective, Toshiba's withdrawal from the market was seen as a victory for superior technology. While Blu-Ray had a smaller market share, Sony's control over exclusive content was perceived as a market edge -- Sony is a content producer while Toshiba is not. With the way paved for dominance, the Blu-Ray should have achieved a dominant market share. By 2010, Blu-Ray's sales were increasing in Europe, but HD DVD was still the market leader (Chacksfield, 2010). Pop (2010) notes that notebook makers were reluctant to transition to Blu-Ray, as there are costs associated with switching to the Sony technology, and that many consumers remained unconvinced of the value of paying more for Blu-Ray. The prices on Blu-Ray players dropped steadily throughout 2010 in response to this apathy (Pop, 2010). In 2012, while Blu-Ray market share continues to grow, it still remains below 50%, four years after Toshiba ceded the market to the technology (Digital Digest, 2012).
There are two obstacles that stand in Sony's way. The first is that many computer makers continue to use DVD players -- this is a more common format and a more flexible one that can handle software, movies, music and data. Toshiba still does not include Blu-Ray in its laptops. Looking to another computer maker, another problem is revealed. The MacBook Air from Apple does not have any driver, DVD or otherwise. This is because of the rise of digital streaming as a format for watching video content. Corrigan (2012) notes that while Blu-Ray players are still growing, Internet-based content models are reshaping the market for video content. Services like Netflix in particular challenge the need for consumers to even need to own physical media players.
Thus, the decline of the Blu-Ray relates not only to the slow acceptance of the product by consumers, but also by the rapid acceptance by consumers of alternate delivery models. Blu-Ray is a physical product inherently, and simply cannot compete with digital delivery. The trend towards digital delivery, it should be noted, is not global. In major markets like Japan, North America, Australian and Western Europe, digital content is growing rapidly because the bandwidth infrastructure allows for it, and consumers are able to afford the technology required to play high quality content seamlessly. Digital delivery is not growing rapidly in the developing world because bandwidth and consumer devices cannot handle it. In those markets, Blu-Ray is often hampered by its high cost relative to DVD. Consumers who do not have high-end digital televisions cannot differentiate between the two anyway, so there is reason for them to pay more for Blu-Ray, especially given the lower selection of Blu-Ray titles.
There do not appear to be any significant political or legal factors that stand in Blu-Ray's way, but there may be opportunity created for Blu-Ray in markets where political factors will restrict the growth of digital delivery. The key for Blu-Ray is to understand where these markets are and focus on them. The product is aimed at a very mainstream market, designed to appeal to all consumers of video content, which is most of the world, but Sony has not been able to capture the imagination of many of these consumers. Often, they only buy Blu-Ray by default, meaning that market share is only picking up now as older DVD players begin to be replaced.
Sony is in a difficult place with respect to Blu-Ray. It competes with this product around the world, but more than four years after its major competitor stopped investing in innovation Sony still does not have 50% of the market. Consumers perceive Sony as a cold company, producing technologically excellence products without an ounce of soul. The company needs to overcome this, to make its products and especially the Blu-Ray genuinely desirable. If the technology is superior, consumers should be excited about adopting it. The fact that they are not points to an image problem that Sony faces. It does not form relationships with customers in the Susan Fournier (1998) sense. Sony needs to build that relationship. Rather than being a cold technological leader, Sony needs to cultivate an image as a company that serves as an adjunct to our digital lives. It has the suite of consumer electronics to position itself in this way. People value their humanity even when using electronics. Companies that can successfully convince people that their consumer electronics enhance their lives, as opposed to merely performing well, are the ones that have true brand power in the industry.
The second recommendation is to pursue the Blu-Ray especially aggressively in markets where there are barriers to digital delivery penetration. These markets are closer to offering monopoly conditions than markets where Blu-Ray faces stiff competition from digital delivery. The problem for Sony is that the same markets with digital delivery industries are also the ones that are the wealthiest and most desirable. Sony needs to focus on other markets that are desirable but have less intense competitive environments. BRICS countries -- China, Brazil, Russia, India and South Africa -- are all underdeveloped in terms of their digital infrastructure, but wealthy enough to consumer a considerable amount of video content. These are markets with large populations, growing wealth and barriers to competition -- key factors in revenue and profit generation for a company like Sony. Note that in China there are also significant censorship issues that will stunt the growth of digital delivery even in the parts of the country where adequate Internet infrastructure does exist.
The third recommendation is that Sony needs to convince computer makers to adopt the Blu-Ray. It sees its near monopoly as an opportunity to make money, but if consumers do not care, they will not demand Blu-Ray. That means computer makes will see installing Blu-Ray as an expensive liability, because consumers might choose a DVD device instead for the greater volume of titles and content. With the increasing importance of computers as the main entertainment conduits, Sony needs to overcome this challenge. There is a time frame to this as well -- Sony needs to become the standard for consumers before all manufacturers go the way of the MacBook Air and ignore such drivers altogether.
Sony has basically failed with the Blu-Ray, as after four years it still has not gained the market share one would expect from a monopoly. The company now faces a new competitor in the market, and without having…[continue]
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