When it comes to business, we don't know much. Okay, we know zilch except for one thing: you go into business to make money, not lose money. So can someone please explain why Toshiba is losing approximately $200 or more on every HD-A1 HD-DVD player it sells?

That's what the published report from analyst firm iSuppli (not related to iPod or anything with "i" in front of it) said anyway. According to the report the components needed to assemble the HD-A1 came to approximately $674. This is higher than its estimated retail price of $499 set by the company. If you add the testing, cables, remote control and packaging, the cost goes up to more than $700.

Why the losing price? Probably to establish a toehold in the next-generation DVD market over the more expensive Blu-ray (about $999). This is where the pay-off could come. According to the Consumer Electronics Association, in the U.S. alone, estimated DVD player sales totaled about 16 million units in 2005, not counting PC sales and game consoles. iSuppli says:

"It's unusual to find this level of subsidization outside of the video-game console and mobile-phone markets. Presumably, Toshiba anticipates making back any initial HD-A1 losses with subsequent products. There is little question that Toshiba had to use a high-cost design for its first model. But there is a big question as to whether pricing its player so much less than Blu-ray is worth the financial risk."

iSuppli also forecasted that shipments of both HD-DVD and Blu-ray CE devices will rise to 65 million units in 2010, up from 1.6 million units in 2006. And who will win the Next-Gen Format War? The firm predicts both formats will win ground in the marketplace and it will be too close to call.