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Blu-ray Boosts Inflation As HD-DVD Dies
Electronics | Feb 29, 08
The demise of Toshiba's HD-DVD standard seems to have precipitated a rise in the price of competing Blu-ray players, reminding us that tech prices go up as well as down.
To recap, as anticipated here ("Will Blu-ray Vanquish HD-DVD, And Will Anybody Care?"), the repeated defection of major studios from the HD-DVD camp allowed Sony's Blu-ray high-def format to garner the critical mass necessary to vanquish its rival. This triumph was ratified by Wal-Mart's decision to stop selling HD-DVD devices, prompting Toshiba to throw in the towel earlier this month and discontinue further HD-DVD development.
Leaving aside the question of whether downloads and streaming video will render Sony's victory Pyrrhic in nature, it's interesting to observe the aftermath of the firm's conflict with Toshiba in terms of the pricing of their respective products. As seen in the graph below, as it became increasingly clear to the market that Blu-ray would likely be the winning standard, the lowest merchant price of the Sony BDP-S300 Blu-ray Player, the most popular model on PriceSCAN.com using this high-def standard, actually rose by some 27% percent over the last seven weeks, with the average price rose by over 16%.
Time Period: 6/4/2007 through 2/25/2008
Each tick mark represents one week
Red = High Price, Blue = Average Price, Green = Low Price
You can also see evidence of this effect in the 9% year-to-date rally of the PriceSCAN Blu-ray index.
By contrast, the lowest offered price of Toshiba’s HD-A3 HD-DVD player on this site has fallen over 55% during the last seven weeks, and the average price is off over 45% - see graph below.
Time Period: 9/24/2007 through 2/25/2008
Each tick mark represents one week
Red = High Price, Blue = Average Price, Green = Low Price
The overall PriceSCAN HD-DVD index is off over 38% this year, and in light of Toshiba's decision, a nose dive seems likely as these players join LaserDisc and Betamax on the boulevard of broken video dreams.
The graphs above remind us that the market for tech good goes two ways, both up and down. We've been conditioned to expect only the later type of price action through long periods of innovation and increasing efficiency of production. But the laws of supply and demand are not suspended just because a product contains a microchip. Here we see the power of a pile-on of content providers and vendors to pick out and crystallize a given technological standard (a la the "increasing returns to scale" lock-in theory of W. Brian Arthur) and bolster demand for that technology. Blu-ray's price rise is all the more remarkable in that it is taking place in the context of a slowing economy, when demand for non-essential "luxury" items might be expected to slacken, and that this rally reverses some of the price decline Blu-ray shared with HD-DVD late last year - see "Blu-ray, HD-DVD Prices Falling Like A Gentle Winter Snow (And In High-Def You Can Really See Those Flakes!)."
Then again, as the Fed is rediscovering to its chagrin, prices can go up even as an economy weakens; those raw material prices can be such a pest, no? And while the increased price of Blu-ray is just a drop in the stagflationary bucket, it does demonstrate that more than oil, copper and corn can help drive prices up.
As for early adopters, the Blu-ray contingent can congratulate themselves on saving some money by buying early, while heartbroken HD-DVD loyalists can console themselves with the hope that someday their players might trade as collector's items.
Posted by jeffrey.trester (Permalink)
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