DVD outlook............
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From Page One of Electronic News: January 5, 1998 Issue
Outlook 1998--Consumer Electronics
The Year Of DVD And Other Digital Toys
By Peter Brown
San Jose, Calif.--Much of the outlook for the consumer electronics market in 1998 is tied to the success--or lack thereof--
of the Digital Video Disc (DVD). Although DVD has thus far not lived up to expectations, industry leaders believe all of that is
about to change. They argue in 1998 digital video disc will become the dominant force in consumer electronics, finally living up
to its hype. Even with these optimistic forecasts, what actually will happen depends on the minds (and dollars) of consumers.
Despite the expenditure of millions of dollars in R&D, marketing and advertising, few consumers even know what DVD is.
Now DVD manufacturers are getting ready to roll out second generation drives and players that will feature playback and
proper rewind and fast forward functions that have been missing from first generation systems.
In addition, content on DVD discs has become available during the past six months and there are now more than 600 titles;
and the industry plans to triple that number in 1998.
There are other factors at work that may proliferate the DVD in 1998 including expected lower system price points, and the
integration of DVD with other consumer applications such as digital television (DTV).
DTV might become the most hyped topic since DVD, especially after all of the late 1997 plans to have high definition TVs
(HDTVs) available by fall of this year. All this attention could have a positive effect on DVD because of the close technology
relationship between the two. Consumers who wish to be on the cutting edge might bundle a DVD player with a HDTV for
crystal clear picture and sound. Although the price for such systems will initially be extremely high, some activity might be seen
next year.
Meanwhile, digital cameras are also going to have a big year, according to observers. As the price point for digital cameras
drops close to that of film cameras, the functionality benefits of the digital cameras begins to outweigh the lower price of
conventional cameras.
DVD At The Right Price Points
Market research firm Dataquest, based in San Jose-Calif., forecasts that DVD will have a compound annual growth rate
(CAGR) of 218.5 percent for units shipped between 1996-2001 and 177 percent CAGR on a dollar basis for the same
period. This means that 4.4 million DVD units will be shipped in 1998, posting sales of more than $1.4 billion next year.
Wilfred J. Corrigan, president and CEO of LSI Logic, said DVD is very real and here, now. Next year is going to be the year
of the DVD, he said, because it is hitting the right price point and the performance and quality is so much better than anything
going today.
"I think it's going to grow rapidly for the next several years and it's not unreasonable within two years to have a high
percentage of desktop or portable PCs with DVD installed," said Mr. Corrigan. "Second generation players are beginning to
ship now as well and they are hitting the sub-$500 range and that is getting mighty close to the price of most VCRs. I see 3-5
million units alone sold on the TV side, and the PC side could be bigger than that."
Jeff Winters, VP of marketing at Chrontel, said, "The latest in audio/video media, DVD players will build demand because of
their sex-appeal, the reliability of the media and the omni-usage across video, audio and computer applications."
Then there are those who have a slightly different view of what DVD will be in 1998.
"We are cautiously optimistic about DVD and think it will see significant penetration in 1998. However, this penetration might
be in a different stage of the market," said Rich Beyer, president and COO of VLSI Technology. "We are shipping products
to one DVD manufacturer in Japan and we are significantly involved in the systems that will be shipping in 1998 based on the
Dvix standard."
The Dvix standard depends on the current movie rental theory, where people pay for movies that are encrypted at a local
movie store and there is a time period during which it can be seen as many times as desired. After that time is up, the disc is no
longer good and no longer carries the digital movie. The disc can then be thrown away.
Mr. Beyer said there are three things holding DVD back; the players are too expensive, movie studios are still reluctant to
release the movies because of encryption issues and the time from showing in movie theater to appearing on DVD is
long--somewhere in the range of nine to 12 months.
However, there might be even more serious problems looming. According to Eric Broockman, VP and GM of Cirrus Logic's
Crystal Semiconductor products division, DVD faces the challenge that it is confusing to consumers. Confusion over
competing DVD formats and compatibility issues could cause consumers to stay away in droves.
"If the confusion of DVD and DVD-RAM formats settles down soon enough, and some of the major studios who have been
holding back begin to really deliver content, DVD could be a very big success for the holidays in 1998," said Mr. Broockman.
DTV and HDTV
Late last year, Hitachi, Thomson and Fujitsu said they planned to showcase high definition television (HDTV) at this week's
Consumer Electronic Show (CES) in Las Vegas and they plan commercial availability of HDTVs by fall 1998. Some are even
calling CES, HDTV CES because of the expected showing of HDTV and other DTV offerings.
Despite these bullish claims by the television companies, a majority of executives from the semiconductor industry see digital
television not hitting the mainstream market until late 1999 or early 2000 when more digital content is being broadcast.
However, some still remain optimistic.
"Once you expose the American public to the high quality of pictures then they will be begging to get this sort of TV," said
LSI's Mr. Corrigan. "It's all happening in bits, the portion of the DTV, the portion of the DVD and more and more elements
will come together very soon. The idea of a home theater will then come into play and people won't mind paying $5,000 to
$10,000 for a home theater that has DVD, digital pictures, Internet access and video conferencing." Mr. Corrigan said DTV
will emerge more quickly in the U.S. than other parts of the world because of the development already under way and the
commitment by the FCC.
"We expect the first DTV sets to be on the market for the 1998 Christmas selling season," said Cees Jan Koomen, senior VP
and GM of Philips Communications and Multimedia business group and chairman of Philips Semiconductors North America.
"During the year, we expect advertising and broadcast industries to begin actively planning for the additional services that the
ATSC DTV standard makes possible. For example, because broadcasters can transmit data along with a program, a viewer
might be able to connect to a product web site at the push of a button or bring a Java applet to the screen."
However, Motorola's senior VP and GM of the Consumer Electronics group, Carlos Genardini said DTV is still in the
development stages and shouldn't have an impact at all until the year 1999 or 2000.
"The Asian and Japanese economic crisis will slow the growth down of consumer electronics in 1998," said Mr. Genardini.
"It's possible that funding for some projects may be in jeopardy resulting in a delay. (However) This will not necessarily impact
the U.S. government ruling of digital TV by 2006."
Mark Stibitz, VP of integrated products at Lucent Technology, agrees that DTV and HDTV are clearly in its development
stages, however, when more content is available DTV will come on like a brush fire.
"We are a member of the Grand Alliance and have a program done in conjunction with Misubishi (Electronics)," said Mr.
Stibitz. "We have a strong technology base and have a significant thrust into digital video. When the time comes, we will be
there."
Sony Semiconductor's Jodie Hughes, VP of and GM of the Consumer A/V/D division, said DTV will begin to emerge next
year but the feast won't begin until 2002 because of the complexity issues. "Digital television brings a level of complexity
beyond satellite and cable. As if MPEG decoding wasn't complicated enough it throws format conversion into the mix," said
Mr. Hughes. "The other curve ball it throws television designers is software. The increase in software complexity from
firmware to software is huge. So I see a kind of typical semiconductor trend where everyone rushes to an immature market.
The short-term players get disillusioned and jump out. The real players hang in and thrive."
Dataquest forecasts DTV sets will not have a very big year possibly shipping a little more than 1,000 sets in the U.S. and
approximately 80,000 set-top DTV boxes in Europe.
Digital Cameras
According to Dataquest, another market, digital cameras, is set to explode in 1998 with prices retreating and demand for
better quality pictures becoming stronger.
Fujitsu is planning to roll out its Digital Camera--coupled with Sierra Imaging technology--this year somewhere in the price
range of around $150 to $200 dollars by the end of 1998.
"A single chip digital camera is on our roadmap as well and this is where the whole industry is going, not only Fujitsu," said
Bami Bastani, executive VP of the System LSI group at Fujitsu Microelectronics. "Digital camera technology will revolutionize
the picture-taking industry because you can do so much with it.." |
