We continue on our quest to predict the Blu-Ray vs HD DVD battle by looking at lessons learned from previous standard wars. Last post, we took a look at the railroad wars of the 1800s. Today, we focus on a more relevant standard war in the realm of entertainment media: the color tv formats of the 1950s in RCA vs CBS. 
Back in the day (1941), RCA owned NBC, and was a leading manufacturer of black-and-white TV sets. RCA's main rival was CBS, the top broadcaster at the time. It was already known through out the industry that color TV was the future. In fact, the first color TV broadcast was demonstrated in 1929(!) at Bell Labs. Both CBS and RCA had developed their own color TV technology. RCA had a pure electronic color system, while CBS had a mechanical system. CBS' was first out the gate, but their system was not backward compatible (could not play existing black and white broadcasts). Despite RCA lobbying to hold off until their system was ready, the FCC chose the CBS system as the color standard in 1950 after a performance test showed it was the better of the two.
Undeterred, RCA continued it's pursuit of color full throttle while simultaneously deploying some strong-arm tactics. They continued to bad mouth CBS' technology in an attempt to slow it's adoption, pointing out that CBS sets could not display current black and white broadcasts.
The market landscape also worked against CBS. While they tried to produce expensive color content, there were 12 million black and white sets that couldn't see it versus just a few dozen CBS color sets that could. To compound this effect, RCA intensified their push to get black and white sets out on the market while they perfected their color CRT. This shrewd move buit up an even larger TV population that was oblivious to CBS color programing.
Compounding CBS woes was the fact the had no manufacturing capability - production levels, and the cost dropping that come with it, was a distant dream. This must have tasted especially bad to CBS executives since they fought hard for the political victory and could not capitalize on it.
In the end, CBS was able to avoid complete public embarrassment. With the onset of the Korean War in 1952, the government ordered the suspension of goods involving "critical materials", and that included parts of CBS color sets.
With CBS out of the way, RCA was easily able to gain support for their system becoming the US standard [known as the NTSC - National Television Systems Committee]. Interestingly, the reason that RCA's patented technology was dubbed NTSC and not RCA was for the FCC to save face. They didn't want to be seen as RCA's lackey, but wanted public perception to be that the new standard was an industry consensus. NTSC system was adopted by the FCC in 1953, reversing the 3 year old CBS decision.
Color TV sets were adopted at a very slow pace. This was unsurprising since they cost 3x more than black and white sets, and color programming was not widespread. For example, in 1965 NBC offered 4000 hours of color, but CBS only 800 and ABC even less at 600. And consumers were rightfully unimpressed: only 3% had color sets by 1963.
RCA had already spent over $130 million dollars developing color with no profit to show for it until 1960. They failed to realize color content was the missing link that connected consumers to their new product. No color TV shows available, no consumer interest.
RCA decided to partner with Zenith to roll out their CRTs quicker. In the mid 1960's, color sets got more popular and cheaper as adoption rates started to soar. NBC introduced it's famed peacock to show off it's color programming dominance, and the modern TV era was ushered in.
Varian and Shapiro summed up the lessons learned from the RCA vs CBS war:
- People won't adopt a new technology if the bang for the buck is poor, or the benefit is not apparent at all.
- First-mover advantages can be overcome
- Victory in standards wars often requires an alliance (CBS could have aligned themselves with TV manufactures like Zenith to roll out their technology quicker).
Applying this to the hi-def DVD war, we can see a couple of similarities. First off, slow adoption. Why? There is a content problem and an equipment problem. Equipment wise, not everyone has a HD television, let alone a next generation hi-def DVD player. And content wise, there is a dearth of hi-def titles available (just go to Blockbuster and take a peak). This is exacerbated by consumers who are waiting for a clear winner in the war before making their purchasing decisions. And studios are just as confused. They have decided not to throw their eggs in one basket and instead release hi-def titles in both formats. Except for Sony Pictures, of course.
RCA exploited the fact that one couldn't view existing black-and-white programming on CBS sets, slowing its adoption. The HD crowd, however, didn't make this mistake. Your DVDs will play on HD DVD or blu-ray players without a problem. That's a relief.
Is there a clear first mover here? HD DVDs were available first - and a little cheaper too. But is it being adopted quicker? Sony did a sneaky thing and bundled blu-ray players on all the PS3s (even though it delayed it's release, drove prices up, and caused numerous supply problems). For Microsoft, who is backing HD DVD, a HD DVD add on the the Xbox 360 has been available for $200 USD since late 2006. But they continue to sell it as an add on, not a bundle with the Xbox 360. That may prove to be a strategic blunder in the end. In Japan, the PS3, the Wii, and even the PSP outsell the Xbox 360. Because of it's one year head start, sales tallies in the US
have Xbox 360 at 10 million units sold, and the Wii gaining ground at breakneck speed already at close to 5 million. PS3 lags both plagued with high price and early supply problems (the semiconductor laser components in the blu-ray are costly to manufacture at this time).
With this in mind, there is no incumbent advantage here. Even though Xbox 360 leads in sales, it's not clear how many users feel compelled to buy the HD DVD add-on for almost the cost of a whole Wii. We also know that gamers are likely to have more than one console in the house, and may choose their 1080p console of choice when they see which system has the better titles. Contrast that to RCA , who had significant black and white sets out there (and people only had one TV back then) and built upon that. More recently, no one "owned" DVD technology, or had an incumbent advantage (DVDs were obviously not compatible with VHS) - the specifications were eventually agreed upon by the industry at large and it became an open standard. To be sure, there were differing opinions on things like DVD audio sample rate, for example, but nothing on the scale of VHS vs Beta where rival factions formed.
So far in our analysis, it's pretty clear that it's not that obvious who will win. What we can say, that there is a slight blu-ray advantage because of Sony's PS3 bundling. Also Sony owns a movie studio - this means popular titles like Davinci's Code, the Spiderman and Bond franchises will never see HD DVD release. Is that enough to tip things towards blu-ray? Perhaps. In Part 3 we'll try to wrap this all up.
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