Investor's Business Daily...
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Are Digital Video Discs Too Versatile?
Date: 12/10/97
Author: Nick Turner
After countless fits and starts, the DVD bandwagon may finally roll this Christmas. Then again, maybe it won't.
Philips Electronics N.V., Sony Corp., Toshiba Corp. and others have hyped DVDs, which can stand for either ''digital video discs'' or ''digital versatile discs,'' for more than two years. The discs - a high-capacity version of compact discs designed to hold movies, music and computer data - would be a slam-dunk hit for the industry, they figured.
So far, DVD sales have been respectable. DVD players were introduced in March, and manufacturers expect to sell 500,000 of them by year-end. By then, about 600 DVD movie titles should be available, they say.
But DVD backers have a long way to go before they can call the product a success. Many consumers haven't even heard of DVD. Others are confused by a new DVD standard called Divx. Efforts to develop recordable DVDs are causing more problems.
In short, '97 likely will just be a warm-up year for DVD, with breakout sales coming in '98 or later.
Few doubt the product will eventually take off. Compared with videocassettes, DVDs provide much better picture quality and sound. Resolution is twice as sharp, and they support surround-sound speaker systems.
DVDs have a host of other features. Viewers can select subtitles in a number of different languages. Or they can choose to look at different camera angles.
Players start at less than $500. DVD movies cost between $20 and $25.
Of course, the success of DVDs depends on their adoption by video-rental chains. The price of a disc was set ''low enough so that they could stock it for rental and make back their investment,'' said Steve Einhorn, president of New Line Home Video Inc.
In addition to DVD players, which connect to television sets, manufacturers are making DVD drives for computers.
DVDs for computers, called DVD-ROMs, will provide software developers with much more space than they get on today's CD-ROMs. Each DVD holds 4.7 gigabytes, compared with 650 megabytes for a CD-ROM. Future DVDs should hold even more.
But the adoption of DVD- ROMs will take time. The only computers equipped with the drives are high-end models, and pundits don't expect those to be big Christmas sellers.
Furthermore, there's little DVD software available. However, PC users could use their DVD-ROM drives to play DVD movies - if they have the right add-in cards. ''But I don't know many people who want to do that,'' said Mary Bourdon, an analyst at Dataquest Inc., a market research firm in San Jose, Calif.
The tide could turn next year when Microsoft Corp. will unveil its latest operating system, Windows 98, which supports DVD- ROM. By then, more software should be available.
Electronics companies, meanwhile, are developing devices that will let users record on DVDs. Standards for recordable DVDs, or DVD-RAMs, had been established, but a group of companies split off to develop their own format.
Japan's Sony, Philips of the Netherlands and Hewlett-Packard Co. went their own way and recently unveiled a new technology - DVD+RW. Toshiba and Matsushita Electric Industrial Co. , both of Japan, are in the rival camp. The dispute could mean headaches for consumers down the road.
Then - as if there weren't already enough acronyms to keep track of -along comes Divx.
The Divx system was introduced in September by Digital Video Express LP, a partnership between Circuit City Stores Inc. and the Los Angeles entertainment law firm Ziffren, Brittenham, Branca & Fischer.
Divx machines will play special disposable DVDs with movies on them. Consumers will buy a Divx disc for about $5. When they pop the disc into their player, they have two days to watch the movie as much as they like.
After that, contents are encrypted and can't be seen. Consumers can either throw the disc away or order more viewings through a modem connection.
Divx devices, which won't be widely available until the summer, will play standard DVD discs as well. Divx discs, however, can't be played on today's crop of DVD players.
Zenith Electronics Corp. , Thomson Consumer Electronics - a unit of France's Thomson CSF - and Matsushita have signed on to build the players. And movies are coming from Walt Disney Co.'s Buena Vista Home Entertainment, Viacom Inc.'s Paramount Home Video Inc., Seagram Ltd.'s Universal Home Video Inc. and DreamWorks SKG .
But Divx has its drawbacks. It's Circuit City's baby, so rival retailers may be hesitant to support it. Also, some observers think that hackers may be able to crack the codes of the encrypted movies.
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(C) Copyright 1997 Investors Business Daily, Inc.
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