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Blu-ray's win may not be profitable for Sony
Sony is very happy at the moment with the fact that Toshiba has backed out of the Hi-Def war but the "victory" may not last for very long.
According to analysts from several companies, Sony doesn't completely own the rights to Blu-ray so royalties alone aren't making that much money for them, and with 175 companies backing Blu-ray the competition is fierce.
The Blu-ray association will most likely have to drop prices of hardware in order to gain market share over traditional DVD players and the technology is so expensive that making money will not be an easy task
According to analysts from several companies, Sony doesn't completely own the rights to Blu-ray so royalties alone aren't making that much money for them, and with 175 companies backing Blu-ray the competition is fierce.
The Blu-ray association will most likely have to drop prices of hardware in order to gain market share over traditional DVD players and the technology is so expensive that making money will not be an easy task
``Sony's Blu-ray hardware business model isn't very profitable,'' said Morgan Stanley's Tokyo-based analyst Masahiro Ono, who doesn't plan to raise estimates for Sony. ``Even if it's profitable next year, we can't expect a high margin.''
Since everyone has been comparing the Hi-Def was to the classic battle between Sony's Betamax and VHS from JVC (Victor Co.), the same comparison can be made still and that doesn't look all too great:VHS didn't translate to gains for Victor's stock. The maker of JVC-brand products saw its market capitalization tumble more than 80 percent in the past decade to 70.2 billion yen, less than 2 percent of Sony's value.
``We urge investors to recall what happened to JVC,'' Atul Goyal, an analyst at CLSA Asia-Pacific Markets in Tokyo, wrote in a report this week. ``It gave bragging rights to JVC, but without a sound business model, JVC has been sidelined.''
I doubt Sony will be sidelined thanks to the PS3, but making a ton of money will be another thing... After all, regular players tend to always get cheaper and cheaper and the PS3 has only so much possibility to drop in price that eventually you'll see regular stand-alone players taking over market share from PS3 and then we'll see who's actually making money.``We urge investors to recall what happened to JVC,'' Atul Goyal, an analyst at CLSA Asia-Pacific Markets in Tokyo, wrote in a report this week. ``It gave bragging rights to JVC, but without a sound business model, JVC has been sidelined.''
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