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Blurred picture for DVDs

The DVD is viewed as the inevitable successor to compact discs, CD-ROMs, and videocassettes. But a raft of problems must be overcome first.

The digital versatile disc is viewed as the single and inevitable successor to CD-ROMs, audio compact discs, and videocassettes. But don't expect it to happen tomorrow.

Before the DVD becomes commonplace, it must overcome a raft of obstacles ranging from a limited supply of movie and software titles to competing technology standards from around the world.

To the average consumer, the most visible deterrent to buying into the technology is the The worldwide DVD CD-ROM market dearth of software titles.

"There's not much content, but that situation will change in a year or two," International Data Corporation analyst Wolfgang Schlichting said.

Another major concern for consumers is the limited number of movies available on DVDs. In a high-tech version of the chicken and the egg conundrum, Hollywood studios are waiting for the number of DVD owners to increase before they commit to full-scale digital production.

Analysts disagree over the degree to which the pace of new title releases has hurt the market. IDC analyst David Card warned that the slowness of studios to embrace the new technology could endanger the market altogether if a new technology supersedes DVD in the meantime.

"If DVD doesn't happen between Christmas 1997 and Christmas 1998, it probably will never happen," Card said.

But others say that DVD is here to stay, noting an acceleration in the production of titles over the last quarter and the fact that some video rental stores have begun offering a limited number of DVD movies for rent as well as for sale.

That potential is what so many DVD companies are banking on.

DVD sales are expected to take off in the next few years, especially those of DVD-ROM drives for personal computers. While only 720,000 DVD-ROM drives are expected to ship by the end of this year, analysts expect that 123 million will ship in the year 2001, according to IDC. Revenues from the market are expected to hit $8.1 billion.

Major computer makers already are installing DVD-ROM drives in their higher-end models, despite the fact that there's little but movies to play on them--so far. Companies shipping PCs with DVD-ROM drives include Gateway, IBM, Micron, and Toshiba.

Just as the VHS format took off with the advent of the video rental market, DVD videos soon will depend on the growth of their own rental market, according to IDC analyst Bill Zinsmeister. About 370,000 DVD video players are on the market to date, and that figure is expected to rise.

Consumers are likely to be encouraged by the fact that they can still use their compact discs and CD-ROMs on their new DVD players. However, the advent of recordable and rewriteable DVDs has created a heated standards battles.

Japanese manufacturers such as Hitachi, NEC, and Sony have split from what initially was a ten-company DVD forum convened to propose various and mutually compatible standards into separate, non-compatible camps consisting of DVD-RAM (random access memory), DVD-R (recordable), DVD-R/W, and DVD-R+W (recordable and rewriteable). The first recordable DVD products are expected to hit the market in January, but their market remains amibiguous because of the standards strife. (See related story.)

While this internecine industry bickering continues, the DVD may be losing out on another front to more traditional removable storage technologies from companies like Iomega and SyQuest. These products are both hitting the market sooner than recordable DVDs and are overtaking their levels of capacity.

Despite the compatibility issue, analysts say that most consumers are unlikely to be deterred from investing in read-only DVD while they wait for recordable DVD. That's because the newer DVD technologies will be prohibitively expensive for the average consumer for the foreseeable future, making cost a significant barrier to widespread acceptance of DVD. Analysts point to the fate of CD-R, a recordable CD format that has yet to take off with consumers, as an example.

Schlichting said that DVD-enabled computers are not yet widely available because consumers currently have an appetite for PCs that now cost less than $1,000. Computers loaded with DVD-ROMs are far above that price point. But, Schlichting pointed out, prices on DVD-ROMs may drop to about $100 from $140 during the next six months for original equipment manufacturers.

Even so, consumers may wait for prices of low-end DVD players to match those of high-end VCRs, about $400. Today's DVD drives cost about $600 today, analysts said.

Yet another issue has hindered DVD development in recent months, arising from a technology known as Divx, a format that requires consumers to purchase an encrypted disc that works for 48 hours--an additional fee is required for repeated viewing.

The format has attracted the interest of some studios that believe Divx will offer better protection against video piracy than standard DVD. Some analysts have said that anxiety of Divx emerging as a standard is scaring consumers away from the DVD video market. Indeed many consumers have reacted to the yet-to-be-released format with some hostility.

But in the long term, Divx may offer consumers too little too late.

"It's the worst of all worlds from the consumer's point of view," Card said. "You don't get full ownership, and it's not even cheap enough to justify that fact."

Zinsmeister pointed out that DVD will have a year's head start on Divx, which is not scheduled to hit the market until summer of 1998.  

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