Toshiba taking $200 loss on each HD-A1, sez iSuppli

We've long wondered how Toshiba's able to price its HD-A1 HD DVD player at $500 while the Blu-ray camp will be charging $1,000 and up for their next-gen machines, and now the eggheads over at iSuppli are claiming to have the answer. After furiously running all the numbers through their high-tech calculators, the same company that brought us breakdowns of the iPod nano and Xbox 360 production costs is estimating that it takes $674 worth of parts to build an HD-A1 -- bringing the total cost to well over $700 when you include labor, packaging, etc. -- which means that Toshiba is taking a $200 loss on each unit sold. Rarely seen outside the world of videogame hardware, this pricing strategy is usually employed to build up a customer base for the devices' highly-profitable software, but in Toshiba's case, achieving significant HD DVD penetration prior to the Blu-ray rollout was probably even more important than the few bucks they make from each HD DVD disc that gets sold. Unfortunately for those of us waiting on a burner to hit the market before making the HD optical plunge, it doesn't sound like Toshiba will also be willing take a loss on that RD-A1 introduced the other day, as its $3,400 pricetag seems to more than cover every little component they're stuffing in there.

[Via HDBeat]

[James @ Jun 23rd 2006 1:08PM]

Just FYI, if that number is correct they are actually losing around $400 a unit as they are selling them to Best Buy for $314.

[Jeff @ Jun 23rd 2006 1:19PM]

Has anyone given any consideration to the notion that if the technology is so damned expensive, maybe it's not ready for production yet?
I wish companies would stop forcing overpriced beta versions of hardware and software to market.

[Carlton @ Jun 23rd 2006 1:32PM]

"Just FYI, if that number is correct they are actually losing around $400 a unit as they are selling them to Best Buy for $314"

I find that hard to beleave!

No way they would sell them to bestbuy for 314.

[PlanetGadgets @ Jun 23rd 2006 1:32PM]

Isn't it possible that they get much lower pricing than what's used in the calculations?

[three60 @ Jun 23rd 2006 1:41PM]

Best Buy has 'em available for $499, as Engadget states.

http://www.bestbuy.com/site/olspage.jsp?skuId=7652523&type=product&id=1134699969167

[John doe @ Jun 23rd 2006 2:00PM]

PlatetGadgets,
the people making the estimates use the bulk pricing for the parts

[RazorElite @ Jun 23rd 2006 2:08PM]

Wow, they're obviously pretty desperate to penetrate the market. But hey, who cares. Better for the consumer. Also, $500 is the retail price, I'm sure the wholesale price is considerably lower. Probably around $430. So with Blu-ray you're just paying an extra $500 for well, nothing.

[Ed @ Jun 23rd 2006 2:33PM]

They have been sold out at best buy since launch. And there is no way they ever sold one for $314. If so tell me where so i can pick one up. Right now HD-DVD has the best picture quality.

Sony better get their act together and put out better looking Blu-Ry titles

[steve @ Jun 23rd 2006 3:08PM]

its trues when you buy thousands of units you get reduced prices per unit. its part of how a business prospers.im sure target gets each xbox 360 premium for roughly 240-280 or so.

[Pavel @ Jun 23rd 2006 5:09PM]

"...it takes $674 worth of parts to build an HD-A1 -- bringing the total cost to well over $700 when you include labor, packaging, etc."

I would add $50-100 for advertising and PR.
Anyway, Toshiba seems to want to be #1's in HD DVD branch and with such 'discounts' they'll succeed.

[Bryan @ Jun 23rd 2006 6:47PM]

There's no way it costs them that much to build that machine. I can build a PC with that CPU and Memory, including screen, for under $500, and that's retail pricing.

Remember also that Toshiba makes millions of laptops with most of those chips in them, so they get preferential pricing from the suppliers.

[Oddmanout @ Jun 23rd 2006 9:45PM]

A lot of people thought that Blu-ray was gonna be the slam dunk winner, but it definitely looks set to be more of a fight than that. Blu-ray movies don't seem to have any real visual superiorty to HDDVD, but they are the clear victor in total storage. Contrairly(sp?) wise HDDVD is of course visualy the same, but its the clear winner in cost, whether you go 360 external OR stand alone console player. Each tech has a strong point.

Personally I think the HDDVD camp should just go balls to wall and play their strategy of price to the hilt. RELEASE/SUBSIDISE THE HDDVD BURNERS, and pirates will do the rest. Once people can start getting pirate copies of high def movies for $10 - $15 bucks on HDDVD it will be the obvious choice. And once they see how dodgey the pirate DVD industry is, they'll buy factory pressed HDDVD's of the movies they REALLY want to see.

As for the Blu-ray camp, ie Sony, well...they already have virtually the entire future of their company riding on the PS3 (which even many staunch Sony fanboys love to HATE), it's sales, and it's ability to make both Blu-ray and Cell profitable, so they already are balls to wall. I guess they just have to hope they gambled right.

Then again, maybe the little part of me that remembers Sony's glory days with fondness will be right. Maybe the PS3 as we've seen it is a smoke screen, a hoax. A misdirection to pull the wool over sly fox Billy G's eyes. And come launch day a fantastically inovative, physically attractive, genuinely cool, and reasonably priced piece of kit will drop out of nowhere with 'PS3' written on it (in a non 'Spiderman Font')....

But to tell the truth, I'd actually rather see THAT happen with a Dreamcast II instead...

[Guruboy @ Jun 24th 2006 2:11PM]

I'm not one to insult a product or company because it's losing money on a product, especially if the product is good. If the losses don't affect how the company does business in the long run, cheaper is better and that's the simple truth.

I would trust the pros that do the research. Bryan you have the wrong idea, PCs cannot be compared with media players or consoles or anything.

People like Bryan and anyone trying to say the numbers are wrong or telling professionals that they aren't conducting these studies correctly are all fanboys, and they're just stupid because they actually think that the $200 loss is a bad thing. It's only bad for the company, like I and many others said. Consumers win.

[chris schmidt @ Jun 24th 2006 4:26PM]

iSuppli is known for providing very accurate cost estimates. They get real numbers from the component suppliers. The parts are $500+ because they're not produced in high-volume yet.

To the guy comparing the cost analysis to his home PC build cost - those are VERY high volume commodity items in your PC - that's the difference.

[Jason @ Jun 25th 2006 1:08AM]

Yes, Bryan, I'm sure you can build a PC for under $500 but unfortunately it will be lacking the FREAKING HD-DVD DRIVE THAT MAKES THIS AN HD-DVD PLAYER, UNLIKE YOUR PC.

Idiot.

[Ben Hobbs @ Jun 25th 2006 8:26AM]

I also cant see those parts costing over $700, perhaps at retail yes - But as someone buying 100,000 at a time, no way - perhaps $500.

Also there's economies of scale to think about, sure making 1 will cost a lot, maybe even 10,000 will cost a lot but down the road when your bashing out 100,000's then costs come slamming down.

I'm personally happy about it, I reckon that HD DVD and Blu-Ray players cost about the same to make. Isn't it nice that one of the groups understands its a lot of money and is willing to take the hit on price as a loss leader. Rather than Blu-Ray insisting on grabbing every bit of profit they can in teh early days.

[Keith @ Jun 26th 2006 11:18AM]

I can't believe what I'm reading!! What is the point? They don't make royalities like the video game makers do they?


Keith
http://www.eHDMI.com