Toshiba: Refund HD DVD owners' money

I'm still a bit stunned by the lightning-fast speed with which Toshiba Corp. threw in the towel on manufacturing its HD DVD players after Warner Bros announced it would be throwing its full support behind rival Blu-ray Disc format.

I've been watching the battle between the two next-generation, high-definition optical disc formats with keen interest and figured that Blu-ray would win at some point but not this point. After all, the battle between VHS and Betamax video tape formats dragged on for a decade in the 1970s and 1980s, so I figured this high-def DVD battle would last at least half that time. But alas, movie studios didn't want to repeat history (apparently Betamax supporter Toshiba didn't want to either), so they forced the industry's hand and pulled their support.

In the wake of Toshiba's decision are hundreds of thousands of consumers who shelled out anywhere from $100 to hundreds of dollars for an HD DVD player. While an HD DVD player is still an upconverting DVD player, and it can play whatever HD DVD movies have already been released, otherwise the boxes have no future. Without movie studio support, there will be no more HD DVD content to play on those boxes. I think Toshiba should at least offer some credit or rebate, particularly on the higher priced models and those purchased most recently.

But according to Valleywag, a Silicon Valley tech gossip pub, Toshiba has left its customers out to dry. There will be no refunds. I checked with Toshiba customer support and I was told the same thing.

Some may take the position that consumers who gambled on HD DVD players while the format wars were going on got what they deserved. I don't. Consumers aren't always savvy, but that doesn't mean they should be taken advantage of. They trust that when they buy a product, it will have some reasonably viable future, and this product simply doesn't. "Now you have to go buy a Blu-ray player?" says Gloria Barczak, a professor of marketing at Northeastern University in Boston.

Barczak believes Toshiba is already facing a flood of attempted HD DVD returns from angry consumers who purchased players over the holiday season. "I would return it. Absolutely," she says.

Barczak goes on to say that while a partial rebate or credit policy may be a financial disaster for Toshiba and other HD DVD manufacturers in the short-term, the smart move is to follow Steve Jobs' example with the iPhone and win future favor with consumers.

In case you're not up on that story, when Apple originally released the iPhone in June last year, it charged $599. Then, three months later, the company dropped the price by $200, leaving early adopters feeling bitter at having paid so much more only months earlier. But Jobs isn't a multi-millionaire visionary for nothing. He knows that loyalty has kept his company afloat through many industry downturns, so he apologized and handed out Apple store credits of $100 to all those folks who paid the original $599.

Barczak believes HD DVD manufacturers could give full or partial refunds based on how long customers have owned their boxes. "So if it's six months we refund it completely. If it's a year, we give you $100 or $200," she says. "That would help them in terms of reputation."

I'm a big fan of the Bible and particularly the Book of Proverbs, which was mostly written by King David's wise son, King Solomon. And the scriptures are quite clear when it comes to money or reputation: "A good name is more desirable than great riches; to be esteemed is better than silver or gold." (Proverbs 22:1).

So with that in mind, Toshiba and other manufactures of HD DVD players should put reputation over profit, do the right thing and offer refunds to those who purchased their products. Whether they do or don't, there's going to be a backlash against them, how much of one is their choice.


Copyright © 2008 IDG Communications, Inc.

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