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To: VidiVici who wrote (41678)	6/1/1999 8:15:00 PM
From: John Rieman	Respond to of 50808

The growth of DVD............................... emediapro.net Industry News Analysts See Bright Future for DVD May 26, 1999 Copyright © Online Inc. Industry analysts weighed in recently with their predictions for DVD-ROM's future. Although they've come up with differing timelines for DVD's dominance in the computer and video realms, they've all agreed that DVD will outsell CD-ROM and VHS formats within the next few years. Ray Freeman of Freeman Associates says that in 1999, of the 110 million ROM drives shipped, only 17 million will have been DVD, but the balance of power is shifting quickly. Freeman predicts that DVD-ROM will beat out CD-ROM by 2001, with 68 million DVD drives shipped as opposed to 60 million CD drives. Three years later, new CD-ROM drives will stop selling, and 140 million DVD-ROM drives will be produced, he says. Freeman bases his predictions on the belief that Taiwan will soon enter the DVD market. The country, which dominates the CD-ROM market by producing low-priced models, did not have access to the technology early on, so prices for DVD-ROM drives have remained high. Once Taiwan joins the fray, he says, prices will drop and the new technology will catch on with consumers. Wolfgang Schlichting of International Data Corp. (IDC) sees an even brighter picture. He says DVD-ROM will outship CD-ROM by the end of 2000. In 2001, he says, 71 million DVD-ROM drives will ship as compared to 43 million CD-ROMs, and the decline of CD-ROMs will continue until they are no longer built. But since there are so many installed CD-ROM drives, Schlichting adds, CD titles will continue to be released for the next five to ten years. Schlichting believes DVD-ROM would move faster if the price gap weren't so big. OEM prices for CD-ROM drives are as low as $30, while DVD-ROM drives cost $80 or more to install. Even by the end of 2000, a $25 gap will still exist, Schlichting says. Ted Pine of Infotech Inc. says his company originally also thought DVD-ROM shipments would overtake CD-ROM by 2000, but now believes the format might not gain an edge until 2002. He attributes the slower-than-expected growth to two factors: a dearth of DVD-ROM titles, and the growth of the build-to-order market. Many consumers are opting to have cheaper CD-ROM drives in their built-to-order models instead of DVD-ROM devices. Pine says CD-ROM followed a similar path with a slow build-up leading to phenomenal growth. Like CD drives, he says, DVD drives will eventually become a standard PC feature and then DVD titles will multiply. On the DVD-Video side, industry experts are more optimistic. The DVD-Video Group and the Consumer Electronics Manufacturers Association believe more than 2 million DVD video players will be sold this year, while investment firm Nationsbanc Montgomery predicts that consumers will own 3.5 million players by the end of the year. The investment firm expects electronics retailers Best Buy and Circuit City to benefit the most from the take-off in DVD player sales. Best Buy alone accounts for about 25 percent of the DVD sales by electronic stores. Nationbanc's report did not address the future of Divx, the pay-per-view version of DVD-Video, which is two-thirds owned by Circuit City. Divx was introduced 18 months after open DVD, and its sales haven't come close to catching up to the open format. Infotech's Pine doesn't think Divx will ever be more than a niche product and may not survive in its current form. "They've always been fighting an uphill battle, because they were second to market," he says. "My feeling is that the technology has longer legs than the actual product." Divx has an extra layer of copyright protection and a user-ID system that Pine predicts may be incorporated into future digital entertainment systems. Pine also credits Divx will driving the success of open DVD by prompting manufacturers to drop their prices to compete against the rival format. By this Christmas, DVD prices are expected to drop as low as $199. Pine believes the open DVD format will make steady progress for the next few years, but won't become a mainstream product until around 2005, when most consumers have advanced home theater systems. Once people have digital cable service and high-definition televisions, and most TV programs and video games are designed for those systems, DVD-Video players will be a must-buy. Lauren Wiley