Why Toshiba quit - Media Wonk - Blog on ContentAgenda.com - 1500000150
In the end, I think Sony just wanted it more. Having tied its two most important strategic initiatives together--like a kid tying his own shoelaces together--by insisting on a Blu-ray drive in every PlayStation 3 console, failure by Blu-ray wasn't just not an option for Sony, it wasn't even worth contemplating because it would have sunk the company. Had Blu-ray lost out to HD DVD in the high-def movie market it would have left PS3 marooned with a drive format that was obsolete for movies and unnecessary and expensive for games, not to mention unwanted by most gamers and third-party game developers. Instead of "merely" another format loss in consumer electronics, it would have crippled a PlayStation division that, as recently as three years ago, generated 70% of Sony's total profits.
In fact, given the damage Blu-ray has already inflicted on PS3 (third place in a three horse field) it's not clear that winning the format war over HD DVD will be enough at this point to salvage the whole Catdog strategy. At a minimum, Sony has blown the chance to achieve the sort of dominant market share it had in previous generation of game consoles.
But what must have been clear to Toshiba--if not at the beginning then in the end--is that the stakes for Sony were such that there really wasn't any cost it wouldn't pay to win the high-def DVD format war. There's nothing Toshiba or its allies could have done to make fighting on too costly for Sony. Ordinary competitive considerations simply didn't apply.
In contrast with Sony, losing the high-def format war, while bitter, hardly poses an existential threat to Toshiba. Though it has a large footprint in consumer electronics, most of its profits come from its semi-conductor business. It also has a substantial business in making turbines for nuclear power plants. Although Toshiba will now have to take a significant restructuring charge, the Financial Times estimates that cutting its losses now will add 40-50 billion yen to operating profits next year ($370-$450 million), which is why it shares jumped 5% on news that it was pulling out.
In the end, Toshiba didn't have to win and Sony did.