Digital devices to kill VCRs?

The trusty family VCR may be endangered. But which digital plaything will take its place -- and how soon?
Written by Richard Shim, Contributor

With sales booming, digital video recorders are set to revolutionise the couch potato experience -- offering such VCR-killing features as customizable programming features and hard disk drives to store TV shows. Consumers bought 350,000 digital video recorders (DVCs), according to Dataquest, and that number is expected to jump to 12.6m by 2003.

Compare those 350,000 sales to the 60m VCRs that jump off the shelves every year, and the DVC remains a niche product. But the picture could be different by 2003 -- by then, another 18.2m hard-drive-equipped devices will be in the market, including set-top boxes, DVD players and television sets.

ReplayTV and TiVo, the two major players in the DVR market, aren't concerned that their DVCs will be outnumbered by new devices with hard drives. "The more devices that come out, the better off we are," said Dave Courtney, CEO of TiVo.

The reason is simple: Both companies see themselves not as hardware manufacturers, but rather as services companies, so there is no threat on the hardware side. Their plans for future services and alliances reflect that outlook.

On Tuesday, Sony announced that it started shipping its $399 (£269) TiVo-based SVR-2000 with a $9.95 monthly service fee or $199 for a lifetime subscription. National availability is expected by late May.

Back in January DirectTV and TiVo unveiled a satellite receiver, which is expected to be out late summer to early fall.

ReplayTV has a hardware partnership with Panasonic, which began shipping its $599.99 ShowStopper PV-HS2000 at retail at the end of April, and has also announced a relationship with Sharp. ReplayTV is in a quiet period and has registered for an initial public offering later this year, so it could not announce details about other alliances, but it has received funding from the likes of Sega, EchoStar, Excite@Home, Scientic-Atlanta and Sharp.

Jay Srivatsa, senior analyst at Dataquest, expects that there will be numerous devices to compete with DVRs, as hard disk drives will be a de facto standard in entertainment devices. Prices will range depending on the amount of capacity, but $200 will be the takeoff point.

Entertainment devices with hard disk drives will be firmly established as a mainstream consumer product by 2003 to 2005, as VCR shipments will begin to fall from 48m in 2003 and drive-based devices will rise from 30.8m.

Falling prices, easier-to-use user interfaces and larger-capacity hard disk drives of these devices will help to push the stop button on VCRs.

"The winner over time will be the company that delivers the best service," said Steve Shannon, vice president of marketing at ReplayTV. ReplayTV and TiVo are continuing to develop new services to entice users.

In addition to integrating its products into as many devices as possible, TiVo will launch a new version of its software well before the end of the year. Among the new features will be the ability to refine the programming users are looking for from genre-based searches now to more subsets such as leagues in sports and specific actors within genres.

Another developing feature, iPreview, will be used by Showtime and NBC first and will allow users to schedule a recording directly from a promo with the touch of a button.

While Shannon couldn't discuss details, he mentioned that new services for users and advertisers on a subscription and pay-per-use basis would generate more revenue for the company.

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