DVD And Conquer

This time last year an excited IT industry waited for Cebit, where it could catch a glimpse of the first generation of DVD-Rom drives in action. Born out of a glorious agreement between two rival consortia in 1995, the DVD specification was in danger of becoming one of the few major technologies to be introduced without a standards war. But of course, that wasn?t about to happen.

DVDs, first known as digital video discs, and now rechristened digital versatile disks ? millions of them nearly became costly drinks coasters last year, so it?s a good name for them ? are CD-Roms on steroids. By using a laser that has a shorter wavelength than those in existing CD-Rom drives, DVD can fit more data on a disc and read it faster, while retaining backward compatibility with CD-Rom. The first phase offered a capacity of 4.7Gb, with subsequent double-sided, double-density disks to have a capacity of 17Gb ? all looking just like a CD.

This concept had been used to pilot two technologies by 1995: multimedia compact disc was supported by Philips and Sony; super density was supported by Toshiba, Time Warner and a host of others. To avoid another VHS v Betamax battle, the two quickly joined forces.

Summer 1996 saw the industry split along an unexpected fault line: the mostly Eastern hardware people fell out with the mostly American content providers. While we had been looking forward to convergence ? the grand title given to the coincidence of business interests between Hollywood and high-tech ? not many stopped to think how different their underlying attitudes were, until people started asking awkward questions about copy protection.

It?s not surprising that IDC claimed in a report released in 1996 that DVD would ?replace CD-Rom as the primary distribution medium for games, entertainment, education, training and other high-volume software by 2001?. Crucially it could store 133 minutes of full motion video, so the major film studios would back it as a replacement for VHS. Players were expected from Toshiba, Sony, General Electric, and a host of other technology and consumer electronics companies by the end of last year.

Last summer, the wheels fell off the DVD bandwagon. To succeed, DVD needed to launch with the backing of content providers ? not just software firms, but also film studios ? to produce software for the consumer market. But the DVD 1 specification didn?t include encryption of data, to provide copy pro- tection, so a pirate could make bit-perfect copies of any disc from any shop using a DVD-recordable drive. At a time when Hollywood was losing $2 billion a year through poor-quality illegal copying, a pirate?s copying kit offered for sale at $500 wasn?t likely to happen.

The lack of encryption wasn?t an ambush, it was simply overlooked in the excitement. ?We just forgot it,? said an engineer who worked on the spec ? and who, not surprisingly, wanted to remain anonymous.

Remarkably, in the face of pressure to introduce a hardware encryption standard for all DVD-Rom and DVD-Ram players, the hardware suppliers in the business held firm. Sakon Nagasaki, director of Matsushita?s DVD effort said: ?Encryption is a problem in the US, not in Japan.? Sim Wong Hoo, CEO of Creative Labs, railed that: ?The movie companies are holding the industry hostage. The PC industry should take a position rather than wait for the movie business.?

The result has been a workable fudge. In October, the two sides agreed on a standard 40-bit encryption method, so players could be manufactured with a common standard to play commercial disks. This will undoubtedly be upgraded in time to incorporate an electronic watermark so that disks don?t have to be encrypted. Embedding this data is the best long-term solution ? it just isn?t ready yet.

?Embedded data still needs to be developed, but it?s an important part of the long-term solution,? said a more conciliatory Alan Bell, chairman of the DVD committee on copyright.

The result has been the first wave of DVD players so far have been launched with little or no software support. The initial target of 300 movies to play on the first round of DVD hardware now looks like optimistic fantasy. The prediction was scaled down to 100 following the copyright dispute, then to 50. As the first players hit the market, the US film studios are still prevaricating, and wondering whether to add extra content to DVD releases to en- courage take-up of the players. Meanwhile, the UK has no local content at all.

Philips has put back hardware release dates. Arjen Bouwman, director of marketing at Philips key modules, says the problem is like selling a car without any fuel. In the US, where DVD-equipped PCs are on sale, as well as VHS-like DVD players, some of the representatives of the hard-nosed Japanese companies are feeling the draught.

?Without a substantial amount of software, DVD will not take off,? says Jack Osborn, president and COO at Mitsubishi Consumer Electronics America.

Craig Eggers at Toshiba in the US adds: ?We need a concrete announcement from members of the software community with regard to their intentions. We are ready, willing and able to introduce DVD to the market.?

When the Japanese players were launched, the launch lost impact because there were too few titles, and those that existed were buggy. Did someone mention CD-I?

Confusion has also dominated the attempts to take DVD around the world. In the US, DVD players will use an AC-3 decoder for multimedia and sound and an NTSC decoder for TV playback. In Europe, the decoder will be Mpeg-2 and Pal. The drives will be the same. This makes the job of producing DVD products easier for drive manufacturers, but harder for anyone attempting to create retail products.

Creative Labs is one UK supplier that?s playing safe. Although the firm?s DVD product launches in the US this quarter, don?t expect it in the UK before Christmas, counsels multimedia brand manager Jan Hauer. ?We don?t think the market is big enough and we are concerned that the drives are not at a consumer price point yet,? he says. ?We will market DVD like a CD-Rom drive, but our market is below $200 and currently it?s $500 or more.?

Hauer admits he has had calls from software developers asking when the drives are available ? the result is a chicken and egg situation, where local content is delayed by the lack of local drives.

?DVD has fizzled. It was very much hyped after CD-Rom drive prices crashed in 1995, and people looked for a replacement. Now prices on eight-speed and 12-speed drives have recovered a little, it?s no longer a priority.?

Hauer dismisses the predictions of companies like Philips for DVD shipments. ?This is typical hype. A lot of vendors told us by the middle of the year there would be shipments of 100,000 a month ? that?s clearly not going to happen.?

The slightly bizarre result is that Creative may well reposition its DVD-Rom drive as a CD-Rom drive that?s enabled for DVD. This avoids the consumer perception that DVD drives are not backward compatible, and means that Creative doesn?t have to wait until there are shelves of DVD software to sell with the drive. Of course, this depends on the cost of a DVD drive falling far enough to make it commercially possible.

Hitachi is a lot more enthusiastic ? DVD product manager Nick Sundby thinks the idea of positioning a DVD drive as a CD-Rom with knobs on isn?t practical. ?The price gap between CD-Rom and DVD-Rom is going to be there for a couple of years yet, but I think awareness of DVD is good,? he says.

?A lot of people know about the drives, it?s just that not many have seen a decent demo.?

Hitachi?s projections predict that it will sell 900,000 DVD-Rom drives in Europe, with the UK representing 180,000 of them. With an OEM price of $350, that?s a $60 million business in Europe for Hitachi, if its DVD dreams come true. Much of that depends on software becoming available quickly, and Sundby predicts a time lag of up to eight months, so it will be late summer before there?s anything to play on the drives.

Ironically, Sundby looks on the fight over encryption as having made DVD stronger. ?It was demonstrated that the vendors wouldn?t proceed until copy protection was sorted out. We all had to hold back for a couple of months, and we did,? he says.

Between Hitachi and Creative?s position, Murray McKerlie, product marketing manager at Toshiba?s PC division, has solid, rather than spectacular expectation for DVD this year.

?For consumers, DVD is already happening: the products are available in Japan, and will be in Europe by the middle of the year. In the PC division, we were the first to launch a desktop PC with DVD in the US, and we?re looking to repeat that in the UK. But while we?re keen to position DVD as a business tool, that?s quite a way away,? he says.

McKerlie is the first to admit that ?there isn?t a massive pent-up demand? among Toshiba?s customers. ?We are still building awareness. DVD has got promise, but we are all still doing an education job.?

Inevitably DVD will be a success. Just as fast CD-Rom drives followed slow ones, so DVD will follow CD. Not least because DVD, with its increased capacity, gives software developers more space, something they need far more urgently than a drive that spins faster.

By 2000, drive manufacturers will look back on the DVD encryption wars of 1996 as a lesson in how high-tech adapted to play by other rules than its own. By then, we?ll all be wondering how on earth we put up with those tiny 650Mb disks.

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