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CD-ROM prices plummeting

As DVD-ROMs start showing up on midrange and high-end PCs, CD-ROM drive makers are slashing prices and targeting the sub-$1,000 PC.

As DVD-ROM drives start showing up on midrange and high-end PC systems, CD-ROM drive makers are slashing retail prices and targeting the popular sub-$1,000 PC in an effort to stave off obsolescence.

Though unable to offer the fancy multimedia capabilities of the next-generation DVD (digital versatile disc), CD-ROM drives will remain popular on low-end consumer PCs until the price difference between the two technologies disappears, analysts say. That is expected to happen by 2001.

DVD-ROM drives can store up to 17GB of data, far more than the 650MB capacity of CD-ROM drives, and have accordingly been touted as the heart of future entertainment appliances.

For their part, CD-ROM drives are still increasing in speed, but the advances have been virtually undetectable to consumers, said Mary Bourdon, an analyst at Dataquest. "It didn't make any difference...because the CD-ROM software that was developed was for the [slower] CD-ROMs, which were 2X and 4X," she added. 2X and 4X refers to twice and four times the standard speed of a CD-ROM drive.

Consequently, CD-ROM makers have been forced to compete on price instead of performance to attract consumers. CD-ROM drives broke the $100 retail price point two years ago, creating a surge in consumer demand, Bourdon said. Prices have since dropped to around $55 for low-end CD-ROM drives.

Fry's Electronics, a San Francisco Bay Area computer retailer, said that a 16X CD-ROM drive is now priced around $69. Prices will undoubtedly continue to drop, according to the company.

Also, reports coming out of Taiwan say that country?s CD-ROM drive makers are pricing their drives in Asia at about $54, while the production cost is about $40, according to a report in Nikkei Business Publications, citing a report in the Commercial Times of Taiwan.

These rock-bottom prices will be enough to secure CD-ROM technology a slot on most low-end PCs for the next few years, according to Ted Pine, an optical storage analyst with InfoTech Research. Pine predicts that by the end of 1999, a 32x CD-ROM drive will cost around $59.

"There's a pressure on the marketplace, which is not to deliver cutting-edge performance, but to consolidate performance and bring it to the mass market," he said. "As long as that pressure continues, there's going to be a demand for CD-ROM drives."

Meanwhile, DVD prices have already dropped enough that by the end of the year, DVD will be showing up on some midrange PCs in addition to high-end systems, Pine said. "The enthusiast buyer is getting a DVD-ROM drive today. But towards the end of the year, you're going to see DVD drives more in the mid-market system.

The June release of Windows 98, with its built-in support for DVD technology, will also spur DVD sales, Pine said. DVD drives can store up to 17GB of data, enough to hold entire movies and play them back at much higher resolution than VCRs, as well as play music and read information off older CD-ROM discs.