DVD replication: the other millennial dilemma – digital video discs
Lee Hollman
Forecasts for the DVD marketplace have in the past been optimistic, if not overstated. Though market research firms and manufacturers predicted in 1996 that DVD hardware and titles should have reached critical mass by now, neither has won widespread popularity among consumers of digital media. The convenient and relatively inexpensive CD-ROM format is still I the medium of choice for businesses and home users alike, though how long it Will maintain its lead position remains to be seen.
The current consensus on DVD-ROM drives is that they’ll begin to edge out their CD-ROM predecessors by the year 2000. If the coming of the next century marks a shift toward the new platform among computer enthusiasts and professionals, replicators will need to keep up with a sudden high-volume demand for DVD titles. This presents them with their millennial dilemma: how soon should they upgrade their facilities to meet the impending DVD boom? Many of the leaders in the replication field have already prepared for it, but also concede that they’re waiting to see how quickly the number of available DVD-ROM titles will increase in the next two or three years.
WHAT THE ANALYSTS SAY
Computer industry analysts are anticipating a rapid, almost immediate rise in the amount of DVD-ROM titles that will begin shipping. “This year the hardware market will grow, but by 1999 you’ll start seeing a lot more DVD-ROM titles released,” explains Julie Schwerin, President of Woodstock, Vermont-based market analyst InfoTech.
Schwerin estimates that the initial push to market DVD-ROM drives will happen, during second quarter 1998, and anticipates that 46.7 million of them will be sold by the year 2000. Continued production of the drives will motivate software publishers to further their DVD-ROM output, so replicators will need to accommodate large orders for that format. Most are already prepared to do so.
“I’d say that 80 to 90 percent of the replicators that we’ve been in contact with now have DVD-ROM capacity,” says Jennifer Doyle, Editor of Simba Information’s Multimedia, Entertainment, and Technology Reports. “Close to 100 percent will by the end of 1998.” Most of the machinery used in replicating CD-ROMs will still be applicable to the DVD format, so that upgrading it won’t require too much effort. “It’s the same basic form of media,” asserts Marc Hardie, Senior Analyst, Entertainment and Technology Strategies for Forrester Research. “The difference is the higher quality silicon on DVD discs, and a more precise laser implementation for writing. You simply have to narrow the laser to make the conversion to DVD.” This has proved convenient for replicators, as their clients are gradually entering the DVD marketplace.
Though 1997 marked the successful premiere of DVD-Video releases, the DVD-ROM market was far less active. That’s changing in 1998. “There are 300 to 400 DVD-Video titles available now, but only a little more than 300 DVD-ROM software releases at most,” says Hardie. “Of that 300 or so, about 25 to 30 percent of them are just CD-ROM titles transferred to a new format. They don’t utilize the DVD platform to its fullest potential.” Replicators are waiting for software publishers to create more content that will do exactly that, and would require at least the minimum 4.7GB capacity of a single-sided, single-layer DVD disc. Development of high-powered DVD-ROM titles is progressing slowly, but some are projected to arrive at retail outlets during second quarter 1998.
WHAT THE REPLICATORS SAY
Whatever the latest projections, replicators are still playing a waiting game to see how soon they can profit from the costly conversion to DVD media. Many view their situation with pragmatic optimism. “When our customers release more DVD titles, we’ll be ready,” says Susan Tyson, Marketing Manager at Quebecor. “There’s not a big push from them yet. But we can be ready for DVD replication in a matter of days.” Tyson’s view of the nascent DVD-ROM market is typical of her competitors, who are also awaiting a necessary upswing in new releases.
Though many replicators have begun producing DVD discs, some are only now beginning to expand their facilities to accommodate the new medium, given the sluggish early growth of the title market. “Right now there’s not enough drives, and there’s not enough software,” contends Jeff Giger, National Sales Manager, Multimedia Division, Maxell. “But more companies are making the move to create content in the DVD arena. The content needs to push the envelope of the format’s capacity before the market can take off.” Nevertheless, Maxell replicated over a half-million DVD discs in 1997, and plans to double the replication capacity of its Santa Clara facility while also expanding its branch in Dublin, Ireland. Giger’s forecast is that reference titles will lead the push for new product, and will help spark the widespread breakthrough for the DVD market that he predicts will occur by the year 2000. Many replicators agree with him on both points.
“What we’re working with now is almost all reference-type material,” says Bob Hurley, Vice President, Software Sales, Sony Disc Manufacturing. He says that the consumers who need those kind of titles have the most capacity-consuming data demands in the electronic media field, and their natural gravitation toward higher-density media will dramatically boost DVD-ROM sales. “Information publishers and business-to-business have more control over their installed base of hardware,” says Hurley, who expects them to be among the chief buyers of DVD products. Sony replicated over one million discs in 1997, and expects to increase their total replication capacity by six times for 1998.
Other replicators are also emphasizing DVD for 1998 and beyond. “We replicated hundreds of thousands of DVD discs in 1997,” says Rusty Capers, Vice President, Sales and Marketing, Cinram. “We emphasize quality over quantity. There are still production issues involved with the discs. They’re more fragile than regular CDs.” Capers cites warpage and jitter among his concerns, but estimates that Cinram will replicate close to one million DVD discs by the end of 1998. There is little doubt among replicators that as the writing process continues to be refined, DVD will take its place as the top data storage option available.
“We believe DVD will surpass CD-ROM and become the predominant format within the next three to five years,” claims Paul Scott, Senior Vice President of Worldwide Sales and Marketing at Technicolor Optical Media Services. “DVD-ROM will not likely replace CD-ROM entirely, but we do expect that it will become a smaller component of the disc business. We replicated over a half-million DVD discs in 1997, and we expect to replicate three to five million in 1998.” Technicolor is not alone in increasing its replication numbers so quickly, nor in expecting the fully realized takeover of DVD among storage options this soon. Many manufacturers share the same opinion, including one of the most influential and successful corporations today.
“Microsoft predicts that 15 million DVD drives will be sold by the end of 1998,” says Steve Grosvenor, Plant Manager, Warner Advanced Media Operations. “So we’re expecting market saturation for DVD products in the next two and a half years.” Grosvenor says that the shift toward the new media has already begun, particularly at Warner. “We replicated over seven million DVD discs in 1997, and intend to nearly double that number by the end of 1998.” Warner began replicating these discs primarily for video companies in 1996, and also helped Nimbus to expand its own facilities.
“We’ve been in an exchange of technology with them,” admits Grosvenor. “They assisted us with our pre-production mastering equipment for standard CDs, and we helped to educate Nimbus about DVD replication.” This allowed Nimbus to join Warner in getting an early lead on a market which had scarcely begun to develop.
Nimbus, like Warner, has been accepting paid DVD replication jobs since 1996. Nimbus replicated over one million discs in 1997, and has expanded its DVD capabilities in both its North American and European facilities. The company, which has facilities in Virginia, Utah, the UK, and Luxembourg, has made a significant commitment to the DVD format and has ramped up to produce an annual capacity of approximately 14 million discs. “Getting into DVD is a tremendous technical leap,” says John Town, Vice President, Research and Development, Nimbus. “We’re glad we did it before DVD became commercially available. To do this while there are orders to be taken is unthinkable.” Town estimates that Nimbus will double or even triple its DVD output by the end of 1998.
Nimbus first researched DVD technology during the winter of 1995, when Town visited the production facilities at Warner Advanced Media Operations. Both Warner and Nimbus are members of the DVD Forum, a loose affiliation of companies responsible for the technological development and production of the new media. That same winter, Town traveled to Japan and met with potential suppliers of the latest replication machinery. By September 1996, Nimbus began replicating discs commercially for the market. They also manufactured a working DVD-Video disc before players were available to the general public. With all of the groundwork completed early on, Nimbus advanced to the frontline of DVD replication. He contends that it will catch on with more manufacturers in the very near future, despite its initially slow integration among them.
“There are three hundred CD plants worldwide, but only ten to twenty of them can fulfill DVD orders,” says Town. He believes that 1998 will see the first large-scale effort to release DVD-ROM software, and that reference materials and games will represent the majority of what software developers have scheduled for availability this summer. While conceding that most of Nimbus’ DVD business to date has come from replicating video titles, Town expects developments in the latest operating systems for home and business computers–like support for DVD-ROM-friendly MPEG-2 file types in Windows 98s Direct Show development and playback architecture–will jump-start further development of DVD-ROM titles, and the DVD market itself.
“The gap between DVD-ROM titles and hardware is the operating system on most PCs,” explains Town. “Windows 95 was written before the availability of the MFEG-2 video format, and before DVD technology was readily available. Windows 98 can accommodate the new platform, and will make DVD-ROM format development much easier.” Windows 98 is projected for a second quarter release, which Town says will spark rapid advances in creating more DVD software. “With an operating system that can handle all DVD-ROM commands, the format will be compatible with all machines. This way, computer manufacturers and DVD content developers don’t have to worry about their products’ lack of compatibility with different systems.” Macintosh systems will all adhere to the QuickTime standard, according to Town, so that they can also universally accept the DVD standard.
WILL THE DVD DELUGE SPELL DOOM FOR CD-ROM?
Though the latest operating systems will do much to quicken the coming DVD revolution, it’s still too early to predict the extinction of CD-ROM. CDs remain the most cost-effective means of data storage, and the backward compatibility of DVD drives enables them to run CD-ROM titles. Town describes CD-ROM as “a strong, buoyant format,” and doesn’t expect it to become obsolete by the start of the 21st century.
CD-ROM’s staying power is good news for computer users of an kinds, who won’t have to purchase new versions of software that they already own and can still take advantage of the greater power and capacity offered by DVD drives and discs. They’ll have the option of working with both formats, and can rely just as much on CD media as they have before.
Yet the demand for DVD-ROM and Video devices and media will only continue its upward course. The end of this century has become an unofficial deadline for replicators; to be ready when the once-stagnant format takes a firm hold on the electronic media marketplace. Though updating replication machinery is a costly investment, the long-term profits from it are virtually assured. Soon DVD may at last live up to the hype that has surrounded it since its birth, and will secure its place as a data storage standard for the new millennium.
RELATED ARTICLE: Companies Mentioned in This Article
Cinram, Inc. 1409 Foulk Road, Suite 102, Wilmington, DE 19803; 800/433-3472 302/479-2500; Fax 302/479-2527; InfoLink #409
Infotech, Inc. P.O. Box 150, Woodstock, VT 05091-0150; 802/763-2097; Fax 802/763-2098; http://www.infotechresearch.com; InfoLink #423
Maxell Corporation of America 22-08 Route 208, Fair Lawn, NJ 07410; 201/703-2168; Fax 201/796-8790; http://www.maxell.com; InfoLink #428
Nimbus P.O. Box 7427, Charlottesville, VA 22906; 804/985-1100; http://www. nimbuscd.com; InfoLink #432
Quebecor Integrated Media 1919 Shepherd Road, St. Paul, MN 55116; 800/451-5742; Fax 612/690-7438; http://www.quebecorusa.com; InfoLink #436
Sony Disc Manufacturing 123 International Way, Springfield, OR 97477-1047; 541/988-7600; Fax 541/988-8099; http://sdm.sony.com; InfoLink #440
Technicolor Optical Media Services 3233 East Mission Oaks Boulevard, Camarillo, CA 93012; 800/732-4555; Fax 8051445-4280; InfoLink #442
Warner Advanced Media Operations 1400 Lackawanna Avenue, Olyphant PA 18447; 717/383-3291; Fax 717/383-0813; InfoLink #445
Lee Hollman (leeholl@tiac.net) is a freelance writer based in Boston, Massachusetts.
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