Storage turns full circle for DVDs

Analysts predict DVD media could outstrip sales of CDs before the year is out.

By Hannah Birtles

The compact disc is about as ubiquitous as digital technology can be, and it has completed its adoption by business as the default optical storage format for small and large corporations.

This could be the year in which that changes. Sales for CD's successor format, DVD, are expected to reach $3 billion in the year 2000 with an expected 38 million drives to be shipped worldwide, according to research firm IDC. This compares with 72 million CD drives - but their sales will only total US$2.64 million. In 2001, the numbers of drives sold will also rise above the CD format's falling demand, according to the IDC predictions.

Graham Penn, general manager of research at IDC Australia, said DVD-ROM drives have been on the market in Australia for sometime now, but it has only been as prices fall that they are gaining wider acceptance.

"We see the Australian market transitioning to DVD-ROM very quickly now [that] price and availability issues are being resolved," said Mr Penn.

IDC forecasts that DVD-ROM worldwide sales will exceed that of CD-ROM by late 2000. During the year 2001, IDC forecasts that 85 million DVD-ROMs will be sold versus a declining 45 million CD-ROMs.

"Overall costs of DVD media are limiting the acceptance," said Craig Beattie, storage product manage for Kodak. "Unless you have files larger than a gigabyte of information that you need to distribute regularly, it is still far cheaper and economical to use CD, but DVD media prices are dropping quickly."

Perhaps the most significant indicator of the shift in attitude to the formats is the abandonment by several major hardware vendors of successful CD product lines.

"Since our decision to terminate CD-ROM production, we have seen a big increase in DVD sales," said Dipak Kumar, group manager electronics group for Hitachi Australia. "We have experienced a five times growth in DVD sales over the last six months."

Mr Kumar said Hitachi sees a strong market for its DVD-RAM in the replacement of DAT and Travan tape drives, offering users access times of 200 milliseconds and flexibility not possible with tape. One DVD-RAM drive can now replace a DVD-ROM, a tape drive, and a CD.

In recognition of the expected growth of DVD over the next few years, Pioneer has ceased production of all CD products and its efforts this year will be solely devoted to DVD related products including DVD-ROM drives, autochangers, recorders and media.

Simon Bartlett, national sales manager multimedia products with Pioneer Australia, said DVD-ROM speed will continue to increase and the various DVD recording formats will become clearer.

"There is little doubt that writable DVD has the potential to become a premier storage technology due to its flexibility, high-capacity, media longevity, and expected compatibility with a large installed base of CD and DVD discs," said Felix Nemirovsky, chairman of the writable DVD subcommittee of the Optical Storage Technology Association.

"However, the battle for supremacy in the writable DVD standards game has inhibited market growth for drives that read DVD discs, because some are afraid of backing the wrong horse. The availability of a specification ensuring that consumers are protected from compatibility issues could be critical for DVD to reach its ultimate potential."

"Standards is the major issue with DVD at this stage," said Mr Beattie. "Confusion in the market is impacting acceptance and sales. People are not sure if they should buy DVD-R, DVD-RAM,DVD+RW or DVD-RW. With these products offering the so-called same solution, recording on DVD, how will the customer know which way to go? Until there is a 'Standard DVD Recording Method', the confusion will be there."

Simon Penny, product marketing manager for Dell Computer Asia Pacific, said DVD will continue to grow in popularity but slowly.

"DVD has been a success so far. But the battle is far from over. We have seen steady demand for DVD."

Mr Beattie said some vendors had plans to extend the storage capacity of DVD media significantly.

"DVD manufacturers have plans for large storage capabilities in the future. Some companies have alluded to capacity in the order of 50GB for DVD-ROM and 20GB for DVD-RAM," he said.

Mr Penny said there has been some growth in the business market as larger firms create in-house DVD-based applications.

"The need for low-cost drives will still drive the life of the CD-ROMs out further," said Mr Penny. "DVD still needs a 'kick' with a killer application to drive further jumps in demand. That stimulated demand will drive volumes, which will in turn lower manufacturing costs of drives over time."