Digital Video Discs, Beta v. VHS All Over Again?

By Marie D'Amico, 

Consumer Players Tussle Anew

If you’re a member of the Generation XXXish, like myself, you may recall the movie rental predicament of the early 80s: Beta or VHS? When videocassette recorders (VCRs) were initially introduced, two competing formats were submitted for consumer consideration. Sony Corporation hawked Betamax, considered by the congnoscenti to be the technologically superior standard. JVC and Matsushita Electric Industrial Co., Ltd. marketed VHS. Like Apple Computer, Inc . with its Macintosh, Sony refused to license its proprietary Betamax to original equipment manufacturers (OEMs) for wide-scale production. JVC and Matsushita licensed VHS to every comer. Apple and Sony learned two lessons which cost them millions and market share: (1) you can make a mint off mediocrity and (2) you must license or you’ll languish.

In ’95, Sony is a consumer-products potentate but their next proposed product may show the emperor has no clothes. Both Sony and Matsushita have been bombarding the media with descriptions of their next generation recording medium, digital video discs (DVDs). They are touting DVDs and DVD players as digital replacements for VCRs and VHS tapes, laserdiscs and their players, video game cartridges, compact discs (CDs), and consoles, audio CDs and players, and computer CD-ROMs and CD-ROM drives. As they did with VCR tapes, DVD vendors propose differing standards: Sony claims their DVDs, known as Multimedia Compact Discs (MMCDs), are technically superior and cheaper to manufacture than Matsushita’s DVDs, called Super Density DVDs (SD-DVDs). Matsushita claims their DVD has already garnered more support with entertainment and electronics bigwigs and while Sony’s MMCDs will be playback only, SD-DVDs will sport a rewritable version.

Both types of DVDs will be marketed sometime in ’96; DVD players will retail initially for about $500 decreasing almost 65%, to $320, in three years. DVDs’ retail prices will be consistent with the current technology they are supposed to supplant. For example, entertainment DVDs will support the same cost structure as VHS tapes; one price for sale, $20 dollars on up depending upon the desirability of the film content, and one price, approximately $2 to $4 dollars, for rental. Sidebar A describes the players, the products, and the self-appointed umpires in this digital joust.

What’s At Stake?

The contestants in this game have already assumed DVDs and DVD players will not be just another expensive, yuppie boy toy sold in the Neiman Marcus Christmas catalog. Bob Finlayson, director of communications for the Video Software Dealers Association ( VSDA ), stated, "DVD represents a tremendous opportunity because of its high quality. It will be a super player able to play music, video games, CD-ROMs, and movies." David Harrah, senior vice-president of Edelman Worldwide , the public relations arm for Time Warner and other companies supporting the SD-DVD format stated, "there are compelling reasons to have digitally encoded audio and video; there is no degradation in quality, it allows users random access to the content, and with the convergence of the entertainment and electronics industries, a common standard will allow DVDs to be used for both." Which digital device’s market will this new technology usurp?

Analog VCRs are ensconced near couches throughout the planet. Since their introduction in the late 70s, VCRs have sold over 500 million units worldwide; 82.5% of U.S. households own one or more, and the market is thriving. In ’94, 1.36M VCRs were sold in the U.S., up 10.6% from ’93. VCRs penetrated more than 50% of all U.S. households just six years after their market introduction. Audio CD players are also growing healthily; they have penetrated 44% of all U.S. households in the 12 years since their introduction in ’83. In ’94, 26.55M audio CD players were sold, up about 30% from ’93, garnering gross revenues in ’94 of $4.8B dollars. In addition, audio CDs constitute 58.4% of the musical software market, they sold 387M units in ’94, earning their publishers almost $5B dollars. About 9.3% to 10.2% of all U.S. households own a PC with a CD-ROM drive; the installed base is estimated at 24M in ’94, almost triple that of ’93. With so many people owning this range of eclectic electronic equipment, the two DVD camps must hope some, or all, of the existing audio and video content markets are supplanted by DVD. As David Baron, Microsoft ’s entertainment industry ambassador says, "the real question is whether DVD/MMCD is going to die in the market because it requires new hardware."

David Kawakami, Director of New Technologies at Sony Corporation, stated DVD players could replace VHS movies because "consumers have already demonstrated an inclination towards collecting home video titles, much of it driven by children’s programming. This new medium lends itself to sell-through because it is easy to replicate, and is as merchandisable and saleable as audio CDs." For manufacturers such as Sony, the potential revenues from entertainment-based applications for DVD are alluring. While it took five years for Sony Music to sell 30M copies of the world’s best-selling album, Michael Jackson’s Thriller , Disney has sold 30M copies of its children’s classic, The Lion King , in less than one year. Mr. Kawakami also stated DVD-based titles would be marketed intensely by entertainment studios who view future technologies, such as video-on-demand, as presenting clear competition to their current revenue bases in the packaged video sales and rental markets. As he said, "DVDs may be their last bite at that apple".

And to some degree, DVD player manufacturers can thrust this nascent format on consumers. Joni Sophir, spokesperson for Pioneer, said they are already considering replacing the CD drive in their soon-to-be released Macintosh clone with a DVD drive. However, the impact will be limited because this PC will be marketed only in Japan. Considering the power of the players in this billion dollar game, one estimate already projects DVD will penetrate 1% of all U.S. households by ’96, its first year of introduction, 2.5% by ’98, 7.4% by ’99, and 11.7% by 2000. As Bob Finlayson says, "These estimates may be optimistic or pessimistic predictors of penetration; the consumer is the ultimate arbiter." Many of the proposed DVDs are double-sided, requiring a consumer to climb out of the couch or chair and flip the disc; this feature could inhibit DVDs takeover of dominant digital media. Of course, in the mid-80s, many us thought we’d never replace vinyl with CDs; now those albums sit forlornly in closets or in thrift stores. As my mother always admonished me, ‘never say never’.

500 Channels and Nothing On?

If consumers decide gigabytes are the future, what are developers going to do with all that space? Most CD-ROMs today, with the exception of encyclopedias, don’t employ the full 650 MB. Nancy Dickenson, a freelance executive producer for HarperCollins Interactive , says she can fill it in a nanosecond. Her latest title, an interactive CD-ROM version of the roaringly successful John Gray book , "Men are from Mars, Women are from Venus," only contained 18 minutes of video because of the space limitations of the medium. Ann Greenberg, co-founder of ION, developers of interactive music CDs by David Bowie , Brian Eno , and The Residents , also stated she could use the proposed capacity. "CDs are interactive story-telling devices which allow you to select between different channels. DVD will allow the user to switch between large amounts of different kinds of video," she said. She’s not concerned currently about it because "DVD’s impact is years away since it won’t be public until ’96 and it will take years to be adopted." Norm Meyrowitz, vice-president of Software Development for Macromedia , stated "With [DVD’s] additional capacity, we will be able to fit significantly more full-screen, full-motion digital video, high-quality sound, true-color bitmaps and interactive animations than on traditional CD-ROMs."

Let’s Play Nice

After the umpires released their rulings for DVD features, both DVD factions made tentative declarations of conciliation. Mr. Taizo Nishimuro, Senior Vice President, Toshiba Corporation , stated, "We invite Sony/Philips to engage in serious discussion to resolve this issue and meet the needs of the software and computer industries." Sony Corporation’s last line in their one-page answer, "We would, of course, be happy to discuss our proposal with all interested parties." These may be media facades, but for developers and investors trying to pick a potential platform towards which to place their money and time, this is not just a game.

Sidebar: Playing in Tonight’s Game . . .

The SD Team

Players: Hitachi, Ltd. , MCA Inc .*, Metro-Goldwyn-Mayer Inc./United Artists (MGM/UA) **, Mitsubishi Electric Corp ., Nippon Columbia Co., Ltd. , Pioneer Electric Corp., Samsung Electronics Co. , SKC Ltd. , Thomson Multimedia S.A., Time Warner , Thomson Consumer Electronics , Toshiba Corporation , Turner Home Entertainment , Viacom , Victor Company of Japan, and Zenith Electronics Corporation .

* Matsushita purchased MCA for $7B dollars in January ’90. Seagram is offering to purchase substantially all of MCA’s assets.

** Turner purchased MGM/UA in ’86.

Products:

Called Super Density DVDs (SD-DVDs). They’re proffering a suite of SD-DVDs:

• SD 5: A single-sided, single layer DVD with a five gigabyte (GB) capacity; about 7.5 times that of conventional CDs (650 MBs), enough for one full-length film and some additional "film-related content" .

• SD 9: A single-sided, single layer DVD with a nine GB capacity, almost double that of an SD 5. SD 9 will support advanced ROM capabilities, such as audio visual games.

• SD 10: A double-sided, double layer DVD with a ten GB capacity, five GBs on each side, or 284 movie minutes. Matshushita describes SD 10, in an interesting public relations ploy as "allowing a full array of marketing opportunities", e.g. , one feature length movie per side or one full-length film and a related computer game. Read: tie-ins.

• SD 18: A double-sided, double layer DVD with an 18 GB capacity, nine GBs on each side. Read: movies and their sequels.

• SD-RAM Single Layer: A single-sided, single layer rewritable DVD with a 2.6 GB capacity.

• SD-RAM Double Layer: A double-sided, single layer rewritable DVD with a 5.2 GB capacity, 2.6GB on each side.

Matsushita has applied for 13 patents on SD-DVDs.

The MMCD Team

Players: Acer Peripherals , Aiwa, Alps, Bang and Olufson, Grundig, JVC , Magnavox , Marantz, Mitsumi, Philips Electronics , N.V., Ricoh , Sony , Teac , and Wearnes Peripherals .

Products:

Called Multimedia Compact Discs (MMCDs). They’re offering two versions:

• MMCD Single Layer: A single-sided, single layer DVD with a 3.7 GB capacity.

• MMCD Double Layer: A double-sided, double layer DVD with a 7.4 GB capacity, or about 270 movie minutes.

Other features: Both SD-DVDs and MMCDs boast backward compatibility with existing audio and data CDs, forward compatibility with read/write and write-once discs, dubbing and subtitling in multiple languages, parental "lockout" for children, switchable wide-screen or TV-screen proportions, and five-channel surround sound.

Umpires: Technical representatives from Apple , Compaq , Hewlett-Packard , IBM , and Microsoft . They propose a single format DVD which satisfies, at a minimum, nine criteria: (1) a single interchange standard for both TV-based and PC-based applications, (2) backward read compatibility with existing CDs, (3) forward compatibility with future read/write and write-once discs, (4) a single file system for both entertainment and computer-based content, (5) a cost comparable to current CD drives and discs, (6) no mandatory container, e.g., no caddy or cartridge, (7) reliable data storage and retrieval for read-only, read/write, and write-once media, i.e. , error rates equal to CDs, (8) high on-line capacity, and (9) high performance for both sequential files, e.g. , movies, and non-sequential files, e.g. , computer data. If you want to join the umps, contact Alan E. Bell, an IBM data storage specialist, at bella@almaden.ibm.com.

Important Fence-Sitters: Daewoo , Disney , Fox , Goldstar, Paramount , whose parent, Viacom , has committed to the M Team, Sanyo , and Sharp .

Questions? Send me email .

Hardware

© 2006 Digital Media