DVD begins final assault on videotape

DVD makers are trying to get manufacturers to back their rewriteable DVD technology, hoping to reap a fortune in royalties and put VCRs out of business.

When digital videodisks first went on sale three years ago, manufacturers only produced devices that could play prerecorded disks. Movie lovers grabbed them up by the millions, making DVD players one of the most rapidly accepted new products in consumer-electronics history. About 10 million will be sold in the U.S. this year.

But the promise of DVD as a replacement for videotape was limited by the expense of recording technology and disagreements over technical standards. Meanwhile, sales of VCRs are still rising, expected to finish the year up 5 percent to around 20 million units in the U.S.

Now, the cost of DVD recording technology has fallen to a few thousand dollars, low enough for affluent buyers and technophiles who tend to be the first buyers of any new technology product. Matsushita Electric Industrial Co. rolled out a $4,000 DVD recorder under its Panasonic brand to U.S. stores in August. And, next week, Pioneer Corp. will join the fray by introducing products at the Comdex computer convention in Las Vegas.

But their machines record disks in different, incompatible ways, just as the VHS and Beta formats do for videotape. Another company, Philips Electronics NV, has developed a third method for DVD "rewriteables," as the disks that can be recorded upon over and over are known. A fourth format, called DVD-R, permits DVDs to be recorded on only once. That format has been more broadly accepted by manufacturers. However, it wouldn't serve as a substitute for people who use the same videotape over and over to record missed TV shows.

So, manufacturers are gearing up for a marketing battle. Each is trying to get other manufacturers to back their rewriteable DVD technology, hoping to reap a fortune in royalties. "I don't know if there's any way we can avoid it," says Andy Parsons, senior vice president in Pioneer's U.S. new media unit. "We're all technology providers."

Rusty Osterstock, a general manager at Matsushita's U.S. unit, says, "There's a choice that's going to have to be made."

Retailers are unhappy about that prospect. Few want to risk winding up with expensive DVD recorders that have been rendered obsolete by market forces.

"We're going to hold back," says Bjorn Dybdahl, owner of Bjorn's Audio Video in San Antonio, an upscale store with a reputation for jumping on new technology quickly. "We'll do seminars for our customers about the products, but we're not going to get financially committed until the manufacturers settle on one system."

In the struggle, both Matsushita and Pioneer are reaching out to computer manufacturers after noticing that compact-disk recording took off when personal computers were equipped with recording drives. At Comdex, Pioneer will announce a DVD rewriteable drive that can be sold as an option for personal computers. Matsushita is touting the speed of its DVD rewriteable format.

Pioneer's DVD-RW and Matsushita's DVD-RAM are supported by the DVD Forum, a consortium of more than 200 manufacturers where technical issues are hammered out. The group earlier this year began working on a program called "DVD Multi" to reduce the incompatibilities.

For instance, the two companies address piracy and copyright-infringement worries differently. Pioneer is relying on the creation of two types of DVD disks, one for professionals and one for consumers. The consumer disk couldn't be used to record certain types of material, including prerecorded DVDs. The Matsushita product uses a special copyright-protection system that allows Hollywood studios to embed signals in a digital file that determines whether it can be copied.

Pioneer's format is designed to be played back on DVD players as well as its recording machines, while Matsushita's isn't. Philips says its format, known as DVD+RW, is also compatible with most DVD players. But it won't begin sales until the second half of 2001.

Meanwhile, other digital-storage technologies are developing rapidly.

The most direct challenge to DVD as a VCR replacement is the kind of machine that uses a computerlike hard drive to record images. Early versions of such machines, developed by Replay Networks Inc. and TiVo Inc., have been slow sellers.

Several manufacturers will use Comdex to show off new, higher-capacity versions of flash-memory cards. But these postage-stamp-size gizmos are used chiefly in digital music players and digital cameras, not for video recording.

TDK Corp. and Calimetrics Inc. will demonstrate a CD that can hold as many as three times as much data as ordinary CDs. The companies plan to sell a special recording drive to PC makers that can store data on the new CD as well as older CDs.

And DataPlay Inc., a Boulder, Colo., start-up has created an optical disk similar to a CD and DVD except that it is the size of a quarter. DataPlay's disk can hold about 80 percent of the digital data a CD can, enough for most record albums and short videos. The company plans to launch its product early next year, initially in digital audio players and digital cameras.

But none of these digital technologies hold immediate promise for use in the dens and TV rooms of most consumers. "The VCR has so many advantages," says Matsushita's Osterstock. "It's still a relatively strong business."


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