DVD, "value rises exponentially with market share".................
scmp.com
Tuesday July 21 1998
Personal Computing
Dell helps DVD take another step towards the norm
COX NEWS SERVICE in Atlanta
If you are selling widgets, you just want to sell a bunch of them with a healthy profit margin. But if you are pushing a format, then just selling 10 times more units than last year may not be enough. You want it to be everywhere.
As the premiere issue of Business 2.0 puts it, in discussing the emerging rules of the new economy, "value rises exponentially with market share" - at least for products that help establish a platform or a standard.
"The more plentiful they become, the more essential each individual unit is, a striking exception to the economic rule that value comes from scarcity."
Or to think of it from the other side, if only one person owns a fax machine, how much is it worth?
In the case of DVD - the digital versatile disc - the format does not completely have to replace the compact disc, which was the first digital medium for pop culture, but it has to be in all the places that people go for entertainment. For DVD to become a roaring success, it must become the way people watch movies on television and on computers, at home, in airports and hotels.
The challenge is like that faced by Apple Computer. The Macintosh computer might be, as founder Steve Jobs put it, "insanely great", but it cannot survive unless a potential purchaser knows there is plenty of Mac-friendly software and CD games on the shelves. Apple has the advantage of already having a large and loyal customer base, along with the disadvantage of competing against the marketing machines of Microsoft, Intel and IBM. Moreover, Mac competitors can argue that their format is as good or better.
DVD starts from nothing. Even worse, most consumers already own CD players. But DVD has an inherent and critical advantage over CDs - they can hold much more than a CD. An entire movie can fit on a single DVD.
Another disadvantage Macintosh has faced is in pricing - many buyers will not pay a premium just to own an Apple. DVD too has been more expensive.
The manufacturers are trying to overcome all these obstacles. More and more movie titles are available on DVD. Most DVD players will be "backward compatible" - capable of playing the millions of CDs that consumers have already sunk money into. And the technology is becoming as mobile as we expect technology to be.
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