Storm Clouds Form over DVD

Storm Clouds Form over DVD

DVD-ROM is cleared for takeoff, but standards skirmishes may ground DVD-rewritable for a while.

John Haystead

DVD storage technology will soon be hitting the market in a big way. Home DVD-video players are now being mass-advertised, first-generation DVD-ROM drives are already available, and DVD-rewritable drives should start to appear in volume early next year.

Expectations are high as market researchers paint a rosy picture of the size and growth rate of the DVD market. International Data Corp. (IDC), a market research firm in Framingham, MA, predicts DVD-ROM will capture most CD-ROM sales by 2001 and that the combined market for DVD-ROM and DVD-recordable drives will reach over $10 billion, with shipments of more than 150 million units.

As recently as a few months ago, it appeared that DVD would avoid the heated standards battles usually associated with the introduction of a new generation of media. Now, however, it looks like it`s time to take off the rose-colored glasses. As a result of Sony`s recent announcement of an alternative approach to the DVD-Forum`s DVD-RAM standard for rewritable drives, there will now be at least two competing product types, with a third technology from NEC potentially further muddying the waters. Once again, OEMs and end-users will have to make some tough decisions before DVD`s full market potential can be realized.

A number of things have changed since the storage market`s first glimpse of DVD technology. Although early observers were certain that the home-video-entertainment market would be the first major driver for DVD, unforeseen obstacles have disrupted these plans. As a result, the PC storage market has emerged as the principal initial opportunity for DVD.

According to Ray Freeman, president of the consulting firm Freeman Associates (Santa Barbara, CA) and facilitator for the Optical Storage Technology Association (OSTA), although DVD-video players have beaten DVD-ROM drives to market, "in order to propel the DVD-video market forward, the movie studios need to make titles available in DVD format, and so far they haven`t rushed to do this."

The principal reason for the delay appears to be lingering concern about licensing and content protection, but Bob DeMoulin, marketing manager for Sony`s Value-Added Products Division, points out that capacity issues may also be a factor. While DeMoulin sees DVD-video eventually becoming a major market opportunity, he points out that "with multiple soundtracks, etc., many movies will require more capacity than is currently being offered in DVD, requiring further advances in the technology before it is truly viable."

The DVD-ROM discs shipping today store 4.7GB (about 135 minutes of video), or approximately seven times more capacity than 650MB CD-ROM discs. Plans call for dual-sided/dual-layer DVD-ROM discs to eventually be able to store up to 17GB, providing a 25x increase in capacity over CD-ROM.

While DVD-video is in pause mode, DVD-ROM is poised for rapid deployment. OSTA has worked to ensure that next-generation DVD readers will be compatible with previously recorded CD-ROM, CD-R, and CD-RW discs. Because DVD-ROM drives will be compatible with CD-ROM products from the outset, users won`t have to wait for DVD titles before they can make at least limited use of the new drives. According to Wolfgang Schlichting, IDC senior research analyst, "DVD-ROM drives will begin to appear in PC-based products early next year and by the second half of 1998 will be standard equipment on many home PCs."

Although CD drives will not be able to read DVD discs, current-generation DVD-ROM drives incorporate a dual-wavelength multi-read optical head that allows them to read both CD-ROM and DVD-ROM format discs.

Growth Stalled

Although overall market expectations for DVD remain high, dramatic growth rates have not been projected for the near term. One reason for this, says Freeman, is that "until major software titles are delivered on DVD discs, most users will be happy with their CD-ROM drives."

Maciek Brzeski, director of the optical business unit of Toshiba`s Disc Products Division, agrees. "Similar to the way rich content multimedia games, libraries, encyclopedias, etc., kick-started CD-ROM sales, these products will be a key driver for DVD." Brzeski expects this shift to begin early next year. Brzeski adds that full operating system support will be another critical pacing element for DVD-ROM adoption. IDC predicts that almost 15% of all software will be available on DVD discs by the end of 1998.

Of course, truly widespread distribution of software titles on DVD can`t occur until there is an installed base of drives, and even then initial titles will be delivered in multiple formats. Ultimately, the transition from CD-ROM to DVD-ROM will be driven by how fast drive prices come down. According to IDC`s Schlichting, "DVD-ROM`s price premium must drop to less than $75 before the mass market will accept it."

Capacity will also be a factor as the size of software titles continues to grow. Currently, CD-ROM`s 650MB capacity remains viable, but DeMoulin points out that "business users are already looking at 4.7GB or more on one disc for database applications, clip-art collections, etc."

Show Me Rewritable

While DVD-ROM drives will have broad consumer appeal, the high-end PC market is ultimately looking forward to a rewritable medium.

The first class of DVD-rewritable products to be announced was the "DVD-RAM" format supported by Toshiba, Hitachi, and Matsushita and adopted by the DVD Forum. DVD-RAM discs will have an initial capacity of 2.6GB (5.2GB both sides), though prototypes for 4.7GB have been developed and a road map is in place to keep pace with the capacity projections for DVD-ROM discs. DVD-RAM drives just started to hit the market, and production volumes are expected early next year.

Initially, Toshiba`s Brzeski expects DVD-rewritable drives to be more attractive to corporate customers than general consumers. "Corporate customers have large amounts of data to store and archive, and since initial drive prices will be in the $400 range, DVD will not be an early consumer-level replacement for tape or other less-expensive backup devices." Though long-term projections are strong, Breszki expects only modest initial sales of DVD-RAM drives. "Corporations generally wait until there is a well-established standard before investing." In fact, IDC predicts that less than 5,000 DVD-RAM drives will be sold this year.

As pricing drops, however, Breszki expects the market to expand as consumers begin to replace their floppy drives, but "this won`t happen until late 1998 or early 1999," he says.

According to Freeman, "After 1999, market demand will shift from CD-RW to DVD-rewritable products." Mary Bourdon, senior industry analyst at Dataquest, a market research firm in San Jose, CA, agrees, but points out that the move implies a substantial installed base of DVD-ROM drives. "DVD-rewritable won`t really capture significant market share until the 2000 to 2001 time frame when the technology is proven," she predicts. "Without an installed base of DVD-ROM drives, it will be difficult for the industry to accept DVD-rewritable technology."

In fact, Bourdon expects DVD-rewritable systems to initially face a battle with high-capacity/high-performance removable magnetic storage. "Until we see DVD-ROM really kicking in with multimedia home-consumer users--and we`re talking two to three years--there`s no compelling reason for DVD-rewritable to be incorporated into a PC."

Standards Battle Brewing

The most important factor affecting DVD`s acceptance rate, however, may turn out to be the need to assure consumers that today`s DVD-ROM drives will be able to read (at least the vast majority of) tomorrow`s rewritable products. In what came as an unpleasant surprise to many, Sony announced it will not develop DVD-RAM products, opting to pursue its own "DVD+RW" rewrit- able technology (see "Why DVD+RW?").

Developed in conjunction with HP and Philips and supported by Ricoh, Yamaha, and Mitsubishi, the "DVD+RW" specification uses phase-change technology and a "wobble-groove" addressing technique that records only in grooves. As opposed to constant linear velocity (CLV), DVD+RW uses a constant angular velocity (CAV) technique (i.e., constant disc rotation speed), handling random accesses and transfers similarly to hard-disk drives. According to DeMoulin, this technique helps calibrate the recording and reading of discs. DVD+RW discs will have an initial storage capacity of 3GB. Sony claims the drives will be available in the second quarter of next year.

While both types of DVD-rewritable technology will be able to read existing DVD-ROM discs, no DVD-rewritable product will be compatible with current DVD-ROM drives. Although this is apparently not a major concern for vendors because the installed base of DVD-ROM drives is currently very limited, the issue is critical for next-generation DVD-ROM drives, which are intended to pave the way for rewritable products.

It`s an open question, however, whether the next-generation DVD-ROM products will be able to read both DVD-RAM and DVD+RW discs, or only one of the two formats. Although this question cannot yet be answered, there is certainly reason for doubt because early DVD+RW drives will not be able to read DVD-RAM discs (although this could change in the future). Likewise, DVD-RAM drives aren`t expected to be able to read DVD+RW discs.

The answer to this question will be critical to the pace of DVD market growth. Says OSTA`s Freeman, "Whenever you have more than one standard or approach, it`s a concern, and if the issues are not resolved quickly, there will be confusion in the marketplace, which will diminish demand." IDC`s Schlichting is even more concerned. "If there is a drive-compatibility issue, the overall market will be impacted dramatically. It will be absolutely essential for the success of any of the competing rewritable formats that they be readable by the installed base of DVD-ROM drives.

VHS vs. Beta?

Although it`s tempting to liken the impending DVD+RW versus DVD-RAM competition to the VHS/Beta debacle, most industry observers shy away from this level of comparison. According to Schlichting, "Unlike VHS/Beta, the DVD formats are not mutually exclusive, and although initial up-front investment will be substantial, on a per-drive basis the cost to make DVD-ROM drives compatible with both (or multiple) types of rewritable discs will be minimal."

Sony`s DeMoulin also downplays the VHS/Beta analogy, pointing out that Sony is also a member of the DVD Forum. Although Sony doesn`t plan to build any products based on DVD-RAM, DeMoulin says Sony "supports DVD-RAM in the spirit of having a unified standard and feel both approaches can exist in the marketplace. The two formats will make their way to different applications."

Still, the appearance of competitive formats will almost certainly mean more work, more worry, and more time for OEMs. "Sony`s announcement has thrown the industry into a confused mode," says Bourdon. This observation is shared by OSTA`s Freeman, who points out that OEMs will now have to give very rigorous attention to determining whether there are indeed critical technology distinctions between DVD-RAM and DVD+RW. If so, some delay is inevitable. "DVD-RAM is well ahead of the DVD+RW initiative in terms of bringing products to market, while the DVD+RW group will have to convince OEM customers to wait for their products," says Freeman.

Meanwhile, OSTA remains on the scene to help resolve compatibility issues among the different approaches. Says Freeman, "These modifications are precisely the kind that OSTA got agreement on for the multi-read process for backward compatibility to CD-ROM, and OSTA will work on a standard approach to ensure compatibility between formats."

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Opinions vary as to the rationale behind the introduction of DVD+RW. OSTA`s Freeman says he`s "confused about why DVD+RW is required at this point" and wonders "if it isn`t really being pushed by those who have something to gain by upsetting the apple cart." IDC`s Schlichting doesn`t disagree with this implication, observing that the same companies now proposing DVD+RW also have major efforts under way in CD-RW. "You have to keep in mind the politics of the marketplace. Any competing formats that confuse the market will likely delay adoption of DVD and widen the opportunity for CD-RW."

Sony`s DeMoulin denies any such objective, claiming the company`s motivation is strictly one of compatibility. "We`re very concerned about backward and forward compatibility, and DVD+RW will have a higher degree of compatibility with CD and other DVD products than DVD-RAM." DeMoulin claims that the manner in which DVD-RAM discs are recorded (land and groove) makes it harder for them to be read by DVD-ROM drives than DVD+RW discs, whereas DVD+RW is a relatively simple modification for drive manufacturers to incorporate. "We want to ensure that as DVD-rewritable products become available, they will be able to be read by the multi-read DVD-ROM drives available at that time."

Richard O`Connell, senior business development manager for Hewlett-Packard, says there are other technical differences between DVD+RW and DVD-RAM. For example, O`Connnell points out that like DVD-ROM, DVD+RW is written in 32K data blocks with written splice areas between the blocks. DVD-RAM, on the other hand, is written in 2K blocks with embossed headers between data blocks, which require lasers to switch back and forth between written and embossed data. "This could be a significant physical difference with respect to data and read/write reliability," says O`Connell.

O`Connell says HP will be actively supporting DVD+RW and is now evaluating products. He claims that the strong CD-R makeup of the DVD+RW industry team is a benefit. "The people supporting DVD+RW are already leading the CD-writable market and know how to take it to the next step," says O`Connell.

DVD vs. Other Storage Technologies

In addition to taking over the CD marketplace, DVD technology will put continuing pressure on other low- to mid-range removable storage products such as low-end tape and magnetic disk drives. Even so, DVD will not have an open field. For example, low-end magnetic drives (100MB and 200MB floppy drives priced in the $99 to $150 range) will also have strong appeal as replacements for 1.44MB drives. IDC`s Schlichting sees the high initial price of DVD-rewritable drives as a drawback, but believes "DVD will have an opportunity if one of the higher-capacity removable magnetic technologies does not establish clear market dominance early."

Against high-end rigid disk drives, DVD will face tougher competition because DVD will not compare well in terms of data access times.

While low-end tape drives are easy targets for DVD, these are the same technologies already targeted by CD-ROM and CD-R. And DVD is not expected to have a significant near-term effect on higher-end tape technologies.

For example, although DVD-rewritable drives will be priced similarly to DAT drives, when both drive and media costs are combined, DAT will still enjoy a strong cost-per-megabyte advantage. Schlichting predicts that DVD`s impact will be mainly felt in limiting the penetration of 4mm tape into the desktop PC market. Similarly, DVD-rewritable will not be competitive with 8mm and digital linear tape (DLT) tape drives, which provide both high capacity and high performance in sequential backup applications.

Toshiba`s Brzeski, however, believes small DVD-ROM jukeboxes (less than 50 discs) will be competitive with tape in some network backup and archival storage applications, particularly in applications where "DVD-ROM offers a substantial convenience factor." Operating system support will pace the adoption of such systems, says Brzeski, because "corporate adopters will wait until drivers are fully developed and tested."

Although DVD-rewritable will reach or exceed the 2.6GB capacity of 5.25-inch magneto-optical (MO) discs, a relative lack of performance will limit DVD`s appeal to MO users. Says Dataquest`s Bourdon, "Unless you`re looking at an inexpensive library system, where capacity points and performance aren`t an issue, DVD will not be a factor." As for 3.5-inch MO, Bourdon points out that, with the exception of Japan, the 3.5-inch MO market is already diminishing. IDC supports this observation, reporting that 70% of all 3.5-inch MO drives are currently consumed in Japan. Schlichting does think, however, that DVD-rewritable will eventually capture this market.

While agreeing that the impact will not be dramatic, Freeman predicts that DVD will nonetheless limit MO`s growth rate. "DVD represents an alternative choice and will be attractive to people more concerned about low cost and ubiquity than performance."

Analysts disagree over the potential impact of DVD on the 12-inch and 14-inch write-once read-many (WORM) optical market. Though DVD will eventually reach the 12GB capacity arena, Bourdon doesn`t see a compelling reason for users to transition from WORM. "WORM performance is very good and the logistics task to switch to the DVD format would be significant," she says, suggesting that the more logical approach would be a removable WORM equivalent in the 5.25-inch form factor.

IDC`s Schlichting observes, however, that the market for 5.25-inch WORM is already declining as applications switch to 5.25-inch MO. Though he agrees that 12-inch and 14-inch WORM are well entrenched as a long-term archival storage media, he believes the increased volumetric efficiency of DVD-rewritable, when combined with jukeboxes, will appeal to many WORM users.

NEC Plays MMVF Wildcard

While the industry is still struggling to assess the impact of competing DVD-RAM and DVD+RW rewritable technologies on the DVD market, NEC may offer yet another alternative. NEC has announced it will commercialize its Multimedia Video Format (MMVF) system in 1998, targeted at both the video and data storage DVD markets.

Reportedly, NEC`s MMVF system uses a 650nm red laser and its own "(1,7) RLL" modulation technology to provide increased capacity over other rewritable approaches. Initial products will store 5.2 GB on a single-sided disk, with growth to 8GB. The use of a blue laser will further increase storage capacity to 15GB to 16GB per side. MMVF will not be compatible with DVD-RAM or DVD+RW.

Since its initial announcement, little information has been made public regarding NEC`s specific plans for MMVF, leaving many observers unclear as to the potential impact of the technology on the overall DVD market. Given NEC`s share of the PC market, however, most agree it could be significant. The company holds a 40% share of Japan`s domestic PC market and close to a 10% share of the global market, including sales through Packard Bell.

"So far, MMVF is more of a technology positioning announcement and, until we hear more about it, it seems more of a technology maturation than a competing standard," says IDC`s Schlichting. This may not happen anytime soon, however. According to NEC USA spokesperson, Bruce Anderson, "It`s still too early in the product-strategy planning process to comment on our plans. We`re continuing to evaluate the standards, but it will be some time before there is a public announcement with regard to NEC`s plans for the North American market."

John Haystead is a freelance writer in Hollis, NH.

This article was originally published on December 01, 1997