Multiple Rewritable Formats Chill DVD Market

Posted on July 01, 1998

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Multiple Rewritable Formats Chill DVD Market

Adoption of DVD-ROM is proceeding apace, but analysts are scaling back expectations for rewritable DVD.

It`s no longer a question of whether the emergence of multiple, competitive formats for rewritable-DVD drives will become a negative factor in the DVD marketplace; it`s only a matter of the scope of the damage. The rewritable-DVD market is languishing in a growing morass of format confusion and indecision, and while the market for DVD-ROM drives is continuing to develop steadily, it`s pace has also slowed.

Although the current generation of DVD-ROM drives comply with the Optical Storage Technology Association`s (OSTA`s) MultiRead specification, which ensures backward compatibility to, and protects user investment in, CD-formats (CD-ROM, CD-R, CD-RW), the same is not true of forward compatibility to the newly emerging rewritable-DVD formats such as DVD-RAM and DVD+RW.

In fact, no existing DVD-ROM drives can read disks created on rewritable-DVD drives of any format, and it`s unclear when such compatible products will become available. Finally, even when compatible drives do reach the market, it`s unlikely they will be able to read more than one of the several competing rewritable formats.

The impending format war is one reason Dataquest, a market research firm in San Jose, CA, has dramatically scaled back its rewritable-DVD market forecasts of a year ago. Says Dataquest senior industry analyst, Mary Bourdon, "The uncertainty caused by the multiple rewritable formats is causing the market to take off much slower than expected." As a result, Dataquest has reduced its expectations for rewritable drive shipments in 1998 from 475,000 units to only 75,000 units, with growth to just 1.9 million by 2001, down from earlier projections of 17 million units.

International Data Corp.`s projections for the rewritable-DVD market also reflect greater short-term conservatism. According to Wolfgang Schlichting, an analyst with the Framingham, MA-based market research firm, "Although rewritable products overall-DVD and CD-look very promising for 1998, this is primarily driven by CD-RW sales (4 million to 5 million units), whereas DVD-RAM will account for less than 300,000 units for the year." (Schlichting does not expect significant DVD+RW shipments in 1998.)

Similarly, for 1999, Schlichting forecasts a total of only 700,000 rewritable units, with no major jump until 2002 when he expects rewritable drive shipments to exceed 10 million units and OEM sales to reach $1 billion.

The DVD-ROM market may also be starting to feel the effects of the rewritable dilemma. In recent focus groups of computer system VARs, conducted by Young Company (Santa Monica, CA), executive vice president Rich Kozak says "participants strongly stressed the importance of forward compatibility for DVD-ROM products and indicated that because they felt that the standards had not stopped evolving, they would be hesitant to specify or recommend particular DVD products."

Dataquest projects total worldwide DVD-ROM drive shipments will reach 5.7 million in 1998, but as pointed out by Bourdon, "The truly well-informed buyer will probably not be as quick to adopt DVD-ROM based on the expectation of being able to take advantage of future benefits and products, especially since they can always later add a DVD-ROM drive that they know will be backward compatible."

Ray Freeman, president of Freeman Associates, a market research and consulting firm in Santa Barbara, CA, and facilitator for OSTA, also observes a growing level of concern in the marketplace. "There`s indeed a lot of uncertainty about when or whether DVD-ROM drives will be able to read re-writable DVD formats, and though some manufacturers have declared their support for one or more formats, the marketplace remains very confused on the issue. Except for leading edge buyers, most people are waiting rather than risk making a mistake."

IDC`s projections also reflect a somewhat more conservative view of the market, although Schlichting still believes DVD-ROM revenues will exceed those of CD-ROM by the second quarter of 1999, reaching over $500 million for the quarter and $2.6 billion for the year. Still, Schlichting expects revenues for the entire CD/DVD-ROM market to shrink initially due to downward price pressures from a crowded marketplace, particularly low-cost CD-ROM drives. "The result will be an initial oversupply of DVD-ROM drives relative to demand," he predicts.

IDC projects total OEM DVD-ROM sales to reach slightly over $800 million this year, with 700,000 to 800,000 units shipped in the first quarter. As early as next year, however, Schlichting sees the market swinging around to significant growth in DVD-ROM revenue. "A number of PC vendors are highlighting DVD-equipped PCs, and as costs come down, demand will grow."

Buyers Forewarned

For PC OEMs and end-users concerned about forward compatibility, the caution appears to be well justified. Until very recently, many industry observers were confident that "next-generation" DVD ROM drives would be forward-compatible with at least one rewritable format, but this is turning out not to be the case.

Jeff Harth, DVD product marketing manager for Texas Instruments` Storage Products Group, in Tustin, CA, recalls that "as late as mid-1997, it was pretty much assumed that 4x DVD-ROM drives would universally support DVD-RAM, and there was a flurry of activity in the design houses to support these requirements."

Now, Harth says the level of activity has begun to dissipate with many OEM customers apparently now willing to go without it. For example, although Toshiba has a leadership role in the DVD-Forum and has announced its support of DVD-RAM, the company`s recently introduced third-generation DVD-ROM products are not DVD-RAM compatible. The new DVD-ROM drives offer 4.8x performance on the half-height DVD-ROM drive and 2.4x on the slimline laptop DVD-ROM form factor.

According to Maciek Brzeski, director of Toshiba`s optical business unit, the primary reason is that there isn`t an existing base of DVD-RAM disks available to read; therefore, "the incremental costs required to implement DVD-RAM read capability can`t yet be justified."

Although Toshiba has also announced its production-version DVD-RAM drive (the SD-W1101, which offers 2x performance on both 2.6GB single-sided and 5.2GB dual-sided media), Brzeski says "for the balance of 1998, these will still be largely adopted only in vertical niche applications such as data and video logging and security," and he doesn`t expect to see them as options in major OEM products until near the end of the year. As a result, Brzeski says DVD-RAM read capability won`t be provided until the company`s next-generation DVD-ROM drives, "which will better coincide with DVD-RAM`s push into more horizontal segments in 1999." With regard to DVD+RW, Brzeski says Toshiba remains exclusively behind DVD-RAM and has no plans to support other formats.

Meanwhile, the Sony/Philips DVD+RW camp is proceeding at its own pace. In April, the ECMA standards body fast-tracked approval of the DVD+RW standard for both 3GB and 6GB capacities and moved it along for ISO certification. The ECMA-274 standard specifies the mechanical, physical, and optical characteristics, as well as the quality of the recorded and unrecorded signals, the format of the data, and the recording method.

Though the products have yet to be announced, Bob DeMoulin, marketing manager for Sony`s DVD products, claims third-generation Sony DVD- ROM drives will read DVD+RW format disks and that "several other DVD-ROM makers will soon announce products with DVD+RW read compatibility, some of whom may also be manufacturers of DVD-RAM hardware."

Sony demonstrated DVD+RW record and playback capability at the PC Expo show in June, recording on a DVD+RW drive and playing back on a modified DVD-ROM drive enabled for DVD+RW. According to DeMoulin, Sony now expects to have a 3GB-per-side DVD+RW drive out by year-end. Earlier, Sony announced its DVD220 "H kit" for upgrading its 5x DVD-ROM drives, and according to DeMoulin, these kits will be available with DVD+RW support later this month, more or less concurrent with the release of Sony`s DVD+RW recorders.

Sony still has no plans to support DVD-RAM. "We see DVD-RAM as more suited to video distribution as opposed to computer data, and while it`s not technically difficult to do, the additional ICs required would add significant cost to the drives," says DeMoulin. But, he adds, "If the market demands it, we would take steps to implement DVD-RAM as well."

Peace Talks Possible?

On one hand, the format wars seem to be heating up. For example, the DVD Forum has reportedly "requested" Sony/Philips to change the name of their DVD+RW technology to remove the term DVD. However, there are also a few signs that some form of compromise solution may be possible.

For example, although NEC previously said that it had no plans to join the DVD Forum or to modify its own high-capacity rewritable storage technology--multimedia video format (MMVF)--the company was one of seven to join the DVD Forum steering committee at the end of May, increasing the forum`s membership from 10 to 17. The other new steering committee members are IBM, Industry Technology Research Institute, Intel, LG Electronics, Samsung, and Sharp. The original 10 members are Hitachi, Matsushita, Mitsubishi, Philips, Pioneer, Sony, Thomson Multimedia, Time Warner, Toshiba, and JVC.

Steering Committee membership, however, does not imply uniformity of direction or adherence to the Forum`s recommendations. The Forum initially proposed the DVD-RAM format as the standard for rewritable DVD, but in addition to Sony`s defection from the DVD-RAM camp, Pioneer has now also announced it will be pursuing a rewritable-DVD format based on its DVD-R technology. Pioneer`s 4.7GB "DVD-R/W" read/write drives are not yet available.

While Freeman notes that "DVD-R/W" is "one more non-compatible format, further compounding the confusion surrounding rewritable-DVD," IDC`s Schlichting believes interest in the format will be primarily limited to the industrial sector for pre-production and professional applications. "It`s really just an additional benefit to Pioneer`s existing DVD-R customers, and I don`t see it having a strong impact on the large consumer market of DVD-RAM and DVD+RW."

Perhaps the most promising new development, however, comes from OSTA. Having more or less resigned itself to the fact that multiple rewritable formats will exist, the OSTA board has voted to undertake a new initiative to define a specification somewhat analogous to MultiRead, that would require DVD-ROM drives to be able to read both DVD-RAM and DVD+RW, and in time be expanded to any type of rewritable DVD media. According to Freeman, "Even though OSTA deplores the fact that there are now multiple choices, it is taking a politically neutral stand to resolve the problem. By not endorsing or advocating one format over another, OSTA is taking a stand on behalf of the user."

The objective of the OSTA initiative is to put a specification in place "by the time that DVD-ROM drives go through one more evolution," that will assure buyers that their drives will be able to play either format disc and that the discs they produce on their DVD-rewritable drives will be readable by other users. Freeman says the new initiative is just now being developed, but that companies representing both formats are already represented in OSTA. Sony/Philips represent DVD+RW and Panasonic, through Matsushita Electric, is now a full member of OSTA representing DVD-RAM. Pioneer is also an associate member of OSTA. According to Freeman, others have been invited, including Toshiba.

Still, it appears that OSTA has its work cut out for itself. According to Harth, "With the complexities involved in supporting all of these formats, it`s unclear where they will all come together. Products can be developed that will read multiple formats, but it will add cost to the drives."

Who Cares?

Not everyone agrees that the multiplicity of rewritable formats is necessarily bad for the marketplace. Ralph LaBarge, president and chief technical officer at NB Digital Solutions (Crofton, MD) and chairman of the SPA DVD-ROM Interactive Media Format Technical Working Group, points out that "it`s sort of what we have now in removable media, with lots of incompatible products and formats. I don`t think you necessarily need one standard for the removable storage market."

While LaBarge acknowledges that standards are clearly needed for mass-produced storage media, he points out that most mass-produced DVD products will be either DVD-video or DVD-ROM, both of which can be played on existing DVD-ROM drives. "Most consumers don`t need rewritable-DVD drives, and even among businesses looking for high-capacity data interchange, there isn`t a crying need for 5GB to 6GB removable storage. There`s time for the standards to sort themselves out."

For others, the implications of the format wars are more immediate. In the middle of last year, TI`s Storage Products Group introduced a DVD-ROM read-channel chip with extra detection and data recovery circuits to support DVD-RAM. Says Harth, "DVD-ROM is where the volume DVD market is, and at that time, DVD-RAM and DVD-R were the only formats we were tracking. Now the drive manufacturers have the burden of trying to decide when and which rewritable-DVD format to support."

Though Harth acknowledges that some of the other emerging rewritable formats have good technical attributes compared to DVD-RAM, he notes "they have also served to fracture an already small, emerging rewritable-DVD market."

The Rest of the Story

Competing rewritable formats may in fact be just one more obstacle along a long course of market hurdles that DVD must overcome before it is adopted into mainstream applications. IDC`s Schlichting, for example, points to the relative cost of the rewritable drives as another continuing drawback. "The cost of rewritable-DVD drives won`t come down as fast as CD-RW, and we`ll continue to see a factor of two price difference for the next five years."

That`s an opinion echoed by Dataquest`s Bourdon, who points out that their already conservative rewritable-drive market estimates depend on a number of assumptions relative to expected price declines. "Though the price points are starting to get more aggressive with DVD-RAM, right now prices are too high to generate anything but a niche market." Ultimately, Bourdon believes it`s still a horse race. "The manufacturers that get to market first with working drives at the right price point will probably capture the larger market share."

Ultimately, however, Schlichting thinks the most important factor may be that none of the rewritable DVD formats can record CD-R. "Rewritable-DVD drives are read compatible but not write compatible. This means CD-RW will still be the lowest common denominator, keeping them popular with users, particularly business customers."

Overall, the DVD-ROM market is caught in the familiar chicken and egg scenario, with its small installed base in turn limiting widespread appeal. Even current DVD-ROM shipment numbers do not necessarily imply actual consumption.

For example, although 740,000 drives were shipped in 1997, there was also a large return rate on these first-generation products, and based on DVD optical-pickup production of over one million units, manufacturers are believed to have scaled back their initial production plans.

For DVD-ROM, however, the basic obstacle to widespread adoption remains the absence of a "killer application." As observed by Bourdon, "There still isn`t any DVD-ROM content that`s worthwhile, and no one is going to buy a DVD-ROM-equipped PC to watch movies." In fact, even for those customers expecting to run compressed-video applications, another factor potentially affecting DVD-ROM sales is the additional cost of the required high-speed external decoder devices. Although software-based decoders are beginning to emerge, they`re still in the early stages of development and also require processors in the 266MHz to 300MHz+ range.

While DVD makers have adopted the MPEG-2 standard for video, no such unanimous choice for DVD audio compression has been made, with debate continuing over whether it should be recorded in MPEG, linear PCM, Dolby AC-3, or some other format. Today`s DVD videos are recorded with AC-3 audio (multi-channel 48kHz sampling rate) which, according to LaBarge "is fine for consumers, but it`s not studio or concert quality, which requires up to 96kHz sampling rates." According to LaBarge, the debate really comes down to questions surrounding technology licensing, with Philips and Sony having proposals that rely heavily on their CD technology licenses, while other approaches do not. "Though it`s really an esoteric issue for consumers, it could actually result in yet another format war."

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DVD Basics

Although both DVD and CD disks are 120mm in diameter, DVD-ROM disks provide 6 to 7 times the storage capacity of a CD. A single-layer DVD-ROM disk holds 4.7GB, and by using both sides of the media and storing two layers of data on each side, a DVD-ROM disk will be able to store up to 17GB, compared to CD-ROM`s 650MB.

In addition to capacity advantages, DVD-ROM drives also perform at much faster rates than CD-ROM. For example, Sony`s 5x DVD-ROM drives reading CD-ROM media at 24x move data at about 6.8MBps, and Toshiba`s new SD-M1102 second-generation DVD-ROM drives support up to 17GB DVD Disc content at 2x and 24x-max read of CD-R and CD-RW. Toshiba has also introduced a "slimline" (17mm high) DVD-ROM drive for notebook PCs. The SD-C2002 provides a 2x-max data transfer rate of 2,700KBps for DVD content and 2,400KBps for CD-ROM content.

Because of their higher capacity and performance, rewritable-DVD drives have been seen as the logical successor to CD-RW and other removable storage technologies for multimedia, backup, data archiving, and software distribution. Among the rewritable-format contenders, only DVD-RAM products have been introduced. In addition to Toshiba`s new SD-W1101 DVD-RAM drive, Hitachi also has its GF-1000 drive and Panasonic has recently announced its LF-D101 product, which provides a data transfer rate of up to 10.5Mbps and a 120ms average seek time.

In March, the DVD Forum announced it would develop DVD-RW as a DVD format for authoring use. DVD-RW is a sequential rewritable disc system using similar plastic-injection substrate as DVD-R, adopting a phase-change alloy material in the recording layer of the disc with similar parameters to DVD-R specifications, allowing DVD-R and DVD-RW discs to be written or read by the same drive as well as to be played back on DVD-Video players and DVD-ROM drives with minimal modification.

The specifications of the DVD-RW physical format are being handled by the DVD Forum`s Working Group 6.

DVD-RAM Jukeboxes on the Way

Despite controversy surrounding rewritable DVD formats, optical jukebox vendors are expected to plow ahead over the next few months with automated units to handle at least one of the formats. For example, Cygnet Storage Solutions is expected to ship within the next month or two a version of its Infinidisc jukebox that accommodates DVD-RAM media and drives. The jukeboxes are based on Hitachi`s GF-1050 DVD-RAM drives.

The Infinidisc can be configured with two to eight DVD-RAM drives and up to 500 single-sided discs. In addition, users can mix and match DVD-RAM and CD drives and media. As such, current CD-based Infinidisc users can field-upgrade to DVD-RAM capability.

Hitachi`s GF-1050 is a 5.25-inch half-height unit with a Fast SCSI-2 interface. The company claims a read/write rate of 1.38MBps, with an average access time of 210ms.

Pricing for the DVD-RAM Infinidisc is expected to be about $33,000, according to Cygnet officials, or 2.5 cents per MB. For more information, visit www.cygnet.com.--DS

John Haystead is a freelance writer in Hollis, NH, and a frequent contributor to InfoStor.


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