A critical element, the PS3 game system, initially should have assured an early victory for Sony. Instead, the Blu-Ray technology made the PS3 too expensive for the market, moving Sony from first to a distant third in that segment. Even so, Sony was selling PS3s at a much higher rate than the combined sales of HD-DVD and Blu-Ray standalone players.
Toshiba needed to cripple PS3 sales, and the weapons were the Xbox 360, which had an HD-DVD option selling in comparatively low volumes, and the Nintendo Wii, which had dominated the market since launch.
There was no apparent focus on moving more Xbox 360 HD-DVD accessories, and Nintendo was manufacturing-constrained, shifting sales over mostly to the PS3, which was seen as newer than the Xbox 360. Toshiba had a significant price advantage on its HD-DVD player, but it allowed prices to creep up during the buying period. This market is incredibly price-sensitive; once prices crept over the critical break point of $200, they slowed sharply because people had set their value point at the earlier prices.
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Second, Toshiba should have worked with Nintendo to ensure it could fulfill Wii demand, holding down PS3 sales. To offset upsetting Microsoft, it should have offered additional incentives and advertising connected to the Xbox 360 HD-DVD drive to ensure higher attach rates and better ramp that product while enhancing the value of the Xbox 360.
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By the way, Toshiba isnt dead yet, and while it will be incredibly hard to come back from this, it isnt impossible (some have already started talking about how). Well chat later about what it might be able to do to turn this around.