CD-R needs to consider upgradeable systems................................
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CD-R Hardware Sales Open the Market For Recordable Software: Developers Need to Consider Business Users and Upgradability to DVD
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The rise in CD-R hardware penetration has opened a tremendous opportunity for software companies to deliver applications that make it easy for users to create their own multimedia content.
The best chance for success in the market will come from catering to corporate customers because 85 percent of CD-R drive buyers consider their hardware a business purchase, according to companies selling the products.
With hardware vendors soon making the transition to CD-RW and rewritable DVD, developers need to make sure the base technology underlying their application is easy to build on so they can update it for the upcoming DVD formats (the specs of which have yet to be determined) without having to make an extensive additional investment.
Despite the impending optical media transition, the recent jump in demand for CD-R software experienced by Adaptec Inc. [ADPT] is a good indication of the market's promise.
The company began shipping the shrink-wrapped Easy CD Creator Deluxe in late July and can't keep up with demand.
"In the month of September, we shipped more than 20,000 copies [of Easy CD Creator], and we would have shipped more if we could have built it fast enough," said Dave Ulmer, director of marketing for Adaptec's software products group.
Market Potential
In terms of market size, Ulmer originally projected he could sell CD software to five percent of all CD-R hardware buyers but now believes the company undershot the product's potential.
The number of CD-R drives sold this year is expected to reach 2.3 million units, more than double the 980,000 units shipped last year and, according to International Data Corp.
Ulmer attributed increased CD-R demand to changes in distribution. He said retail sales for the hardware have increased from 8 percent to 25 percent in the last six months. Moreover, Ulmer said the first quarter of this year was the first time retail sales were stronger than those made through OEM companies and the company's direct business.
If the software division were loked at as a separate company, it would be one of the top 50 software companies in the world, Ulmer said. Based on the division's current run rate, it is expected to record more than $25 million in revenues for the year.
Competing with Adaptec's lead in the market will be tough because the company is the CD-R application leader with more than 70 percent of the market, according to drive manufacturers who bundle the company's software.
"And there is a huge gap between first and second," said Perry Solomon, president of Smart & Friendly.
But Adaptec's hold on the market isn't the only barrier to entry.
Technological Hurdles
"It takes quite a bit of accumulated expertise to write the software that makes these things work," said Gerry Tschetter, a product manager with Yamaha Corp. of America's consumer products division.
PC vendors thinking of incorporating the drives agree that CD-R software is key to making the product something that users want.
"We've passed on the market as of yet, mostly because the user interface up until now has not been something that even advanced users can navigate," said Jonathan Weech, platform manager of Micron Electronics Inc.
But the advent of packet writing and other technological improvements aimed at putting multiple sessions on a disc have made the drive a more viable product that Weech considers "just about ready for prime time."
He said Micron is considering adding a CD-R drive to the desktop in the first quarter of 1998, but also is looking at other recordable media options, including CD-RW.
A DVD-ROM drive that includes CD-R capability could be another one of those possibilities. Several vendors expect to showcase those kinds of drives next month at Comdex, MMW has learned.
Two applications that are a natural fit for CD-R are digital photography and software that allows users to record audio off the Internet. More than 10 companies have come to market with low-priced digital photography tools, and some analysts are confident that the technology could fuel one of the leading consumer electronic growth markets for the next decade.
Bundling with Adaptec
MGI Software Inc. is leveraging its PhotoSuite editing tool in CD-R circles via a bundling relationship with Adaptec. A light version, called PhotoSuite SE, ships with Easy CD Creator Deluxe.
Recordable CD Hardware Sales
(units shipped, x 1,000)
Drive Type 1995
1996
1997**
1998**
1999**
CD-R 250
981
2,349
2,564
1,126
CD-RW 0
0
405
2,751
6,378
*Source: IDC
**projections
"Because Adaptec has a lock on the software that drives CD-Rs, it makes sense to use our relationship with them to get in the door," said Simon Keogh, MGI's marketing manager.
On the Internet audio front, Liquid Audio Inc. is trying to bundle its playback tools with CD-R drives, but has yet to announce any deals.
Adaptec is making some inroads in the audio market with CD Spin Doctor. Included with Easy CE Creator Deluxe, it lets users record their LPs onto CDs via a CD-R-enabled PC anda cable included in the package.
Rather than compete with the resources of Adaptec, some companies are targeting niches within the CD-R market.
Padus Inc., a start-up company led by former Incat co-founder Mirco Caramori, is aiming its products at corporate buyers who need to make multiple recordings.
The company's DiscJuggler builds on the Easy CD heritage and allows users to record on multiple CD-R drives simultaneously.
"With the price of disks and drives getting so low, we think there's a real need for a high-capacity product," said Ken Pomper, Padus vice president of marketing.
Padus is targeting the business market, and company executives don't believe they'll compete directly with Adaptec. The privately funded, five-person company is relying on OEM partners to market and distribute the software for them.
Mitsui Chemical Inc. is licensing DiscJuggler and will sell it under another name to complement the company's 50-disc autoloading replicator. (model ALW-501T). Look for Padus to have product available at booths from Mitsui and possibly Pioneer at Comdex next month in Las Vegas.
Padus also plans to sell the software under the DiscJuggler brand via the Internet at padus.com.
The software is available in three configurations. The $149 package supports a single recorder, the $229 version supports two drives and the $749 package can support multiple recorders. (Adaptec, 408/945-8600; MGI Software, 905/ 707-3650 Padus, 408/377-0300.) |
