World Magazine, Issue 2.8, November 1997
The Life Cycle of DVD
by Russell Bekins
Our intrepid reporter recently stumbled into a copy of The Art of War by Sun Tsu, abandoned, no doubt, by some consumer electronics manufacturer overcome by a momentary attack of ethics at this year's COMDEX convention in Las Vegas. It had the following notes scribbled inside the cover:
1. Develop my new "killer application."
2. Battle to get others to adopt my standard; develop allies.
3. Prepare for the counter-attack of competing products or standards.
4. Launch my application (or compromise) with vigorous campaigning.
5. Quietly abandon my old standard.
6. Develop new "killer application."
"5 years" was written below it on the page, and underlined twice. We believe that this is undoubtedly the smoking gun to a new industry conspiracy. Read on if you dare.
Now Appearing In A Store Near You
The event that video aficionados and multimedia geeks have been anticipating for two years finally happened this year. Digital Versatile Disc players finally appeared in stores, with their crisp quality and superior sound. CD-sized movies are being sold in music and video stores, at a cost slightly above sell-through VHS titles (about $20 - $30) with quality as good as or better than laser disc. At the dawn of the era of the "home theater," DVD set-top boxes are being touted as the greatest home entertainment invention since sex.
What they won't tell you about the DVD player now for sale is that it may just be an interim technology. Though the format has been in discussion for several years, and is likely to be around for a while, changes are coming, and savvy consumers are wary.
Stage One: The Killer App Migrates
Years ago, when the CD standard had just begun, consumer electronics giants Sony and Philips were able to enforce their patents on the medium, and now make a penny or so on every CD made in the world. Every new technology since that time has been an attempt to find the new paradigm that will follow this incredibly lucrative model. It has led to some huge boondoggles, some perfectly amazing industry cat-fights, and some very angry consumers (see archeological chart).
Stage Two: Pax Toshiba
The DVD format which has finally emerged after years of development and bitter format battles is the war-child of harrowing write-offs for hardware developers. It was developed partly by Toshiba, and negotiated by an exclusive club of bickering consumer electronics manufacturers known as the DVD Consortium (affectionately referred to as the "Gang of Ten"). The format uses a video compression standard known as MPEG2, and most movies made for this standard will include high-quality Dolby A3 sound channels. The resulting quality is generally acknowledged to be as good or better than laser discs when the digital compression and mastering is done right. However, the rush to get a few of the early titles out and into the stores has generated more than a few poorly-mastered demonstration discs.
Since everyone has agreed on the same format and will be producing essentially the same product (the assumption goes), economy of scale will kick in. Prices on the machines will drop to the point where they're affordable. Movie titles will be available at competitive costs and take up less room under your television set.
"But wait a bit," the cynics cry. "This thing does not replace my VCR. It does not record my favorite television shows, nor is it likely to in the foreseeable future. I hear all these things about competing technologies. Why should I buy one of these overpriced machines now?"
Toshiba's SD-W1001 DVD-RAM player and disks. © Toshiba.
Failed Formats Aren't Such A Bad Thing After All
Unless you've had a garage sale recently, you probably have some relic of abandoned standards sitting idle somewhere around your house. Got a Betamax tape player? A last-generation Mac or IBM compatible? A CD-I or 3DO player? A DAT tape machine? If you have children, you almost certainly have a disused Nintendo SNES or Sega system sitting around. (For a complete list of dead formats and their frightening consequences, see archeological chart). Surprisingly, it is those abandoned cart games that have provided the new marketing model for the consumer electronics industry.
As formats came and went, the consumer electronics industry was casting about for "economic models" that allow them to launch and develop platforms with a degree of economic comfort. They seem to have found that model in the gaming industry. As Sony PlayStation and Nintendo 64 went though the roof, consumer electronics executives began to realize that consumers would tolerate new standards if they were launched with enough sizzle. Both George Harrison of Nintendo, and Gretchen Eichinger of Sega bluntly assessed the ideal life cycle of a gaming platform at five to six years at the most recent E3 Expo in Atlanta. Sony's Phil Harrison came closest to the issue when he hinted that "this notion of life cycles is as much the industry's self-imposed issue as the consumer's own desire to buy the latest, greatest thing."
This "self-imposed issue" is even more apparent in the computer industry, where the obsolescence of products is down in the range of two to three years. "Intel aggressively funds projects that require better processing power," inventor Bing McCoy reminds us. "They think about what applications will have an appetite for performance." A new corporate ethos is growing increasingly comfortable with adopting and dumping standards in shorter and shorter cycles. The famous doubling of computing power every 18 months is not just a marvel of technology; it's a marvel of consumer swindling.
In this environment, the industry has decided to launch DVD, knowing full well that the format, as presently configured, might well have only a five or six year life span. Actually, the current DVD format may last only a year or two, thanks to the introduction of a new DVD format: DIVX.
Stage Three: Just When You Thought It Was Safe To Return To Circuit City...
DIVX is a recently announced new standard of DVD sponsored by the electronics retail chain store Circuit City, due out some time next year. It offers some distinct advantages for the large studios who have been hesitant to step into the business; it's designed to discourage piracy. The list of copy protection reads like that of the new $100 US bill: watermarking, encrypting, and analog copy protection. Indeed, the cost for this new DVD format will set you back one of those tough-to-counterfeit bills on top of the cost of the current set-top boxes.
But wait, there's more. Much, much, much more. DIVX will enable consumers to rent movies by buying a disc, which they can play for 48 hours, then it expires. Want to watch it again? The machine will modem up the company and charge a credit card account for an additional fee. Wanna buy it? Charge by modem and watch it as many times as wanted. DIVX discs will not play on current "open" DVD players.
Confused? Many industry analysts think consumers will be, but DIVX is confident they'll catch on. "Consumers are smart," waxes Mary Lou Hotsko of Bender, Goldman & Helper, the publicity firm for DIVX. "Once the product is explained, they'll get it." Actually, it's a paradigm that long-time computer users would understand immediately. "It's basically the same as shareware on a disc," says Judy Anderson, executive director of the Optical Video Disc Association. "I loved my experience with being able to buy a program over the phone that was already in my computer as without having to go back to the store or download." The studios also love all this protection and the ability to sell directly to the public; more than half of them have signed on.
Predictably, DIVX has generated a storm of indignation. "It's another misstep in this very confused product launch," Chris McGowan, author of Entertainment in the Cyber Zone, says diplomatically. John Thrasher, Vice President of Video Sales for Tower Records/Video was even more blunt when speaking to Video Business Magazine: "From my perspective, it's just another failed format waiting to happen." It's no surprise that companies like Tower and Blockbuster should oppose this new standard; video rental businesses make extraordinary amounts of money on overdue videos, and don't like the notion of studios cutting out the middle man by selling videos over the telephone lines.
While few consumers are likely to shed tears over the decline of the video rental business, the confusion and competition over DVD and DIVX is likely to slow the launch of the DVD standard.
Toshiba's SD2107 and SD3107 DVD players. © Toshiba.
Stage Four: Beware The Ideas Of Christmas
Toshiba and Warners plan a $30 million holiday advertising blitz, including television, print, POP (point of purchase -- those stand-up cardboard monsters in your video store) and ads on all Warner Videos one may happen to rent or buy. Some of these ads are already out on video cassettes; they feature a family nearly blown out of their seats by their own DVD-driven home theater system. The appeal of these ads is clearly toward younger audiences. The spot emulates the mind-numbing visceral quality of gaming platform television advertisements that have aired over the last few years.
Other companies are getting into the act; most studios plan releases of DVD movies for Christmas. Ingram and Toshiba have partnered for demonstration kiosks in retail outlets, and Philips has joined with Polygram in a similar venture. Even Buena Vista, who has announced that they will release their Disney animation classics only on DIVX, is hedging their bets by releasing some movies on DVD.
Videophiles, those "early adopters" that the industry relies on, may just sit this Christmas season out. They are justifiably leery when every month brings news of a fresh advance. "I'm happy with my laser disc," says prototypical early adopter Josh Catalfo, of Davis, California, indicating that he has no intentions of buying a set-top DVD in the immediate future. "I'm going to wait on DIVX and see if they improve the mastering quality." Clearly, the consumer electronics industry has not factored in the fact that early adopters are among the best informed buyers.
Christmas can be deadly to consumer electronics when expectations are hyped. CD-ROM pioneer and leading developer Jerry Borell reminds us of last year's debacle for the CD-ROM market. "Eighteen wheel trucks were returning (the software) in droves," he points out. "Software suppliers didn't pay the developers or paid them pennies on the dollar. Going into this season there are unpaid debts from last year." While it can be argued that the diffused CD-ROM industry is fundamentally different from a mass market, the lesson is a sober argument not to put all the eggs in one basket.
"I hope the industry and public will be realistic and give the industry a couple of years," worries Tonya Bates of VideoScan.
Stage Five: Laser Rot
For those not familiar with the term, laser rot is what happens when moisture gets between the layers of a laser disc, damaging or ruining the picture quality. It is the metaphorical equivalent of what has happened to this once viable market of videophiles and the 9,000 titles available to them. "A lot of people are really hurting," admits Judy Anderson of the Optical Video Disc Association, once the standards organization for the market.
Where Are These People Buying Their Crystal Balls?
Given the fact that the wars are not over, it's hard to see where the market will be in five years, much less make any predictions. Nevertheless, the industry has generated a virtual hailstorm of felicitous predictions without factoring in the idea that a competing standard would be announced just as DVD was launched.
The happy industry statistics promise the holy grail of all new formats: an economy of scale. A report by Wall Street analyst Sanford Berenstein & Company, summarized in Video Business Magazine, speaks glowingly of "early adopters" of new technology. They predict that those videophiles who thrill to the "latest, greatest thing" will spring to the fore and latch on to the quality of this new medium. It also spoke of an increase of as much as ten points in the stocks of major studios due to this new revenue stream.
This is only one in many hyper-optimistic reports. Time-Warner is predicting that ten million DVD video players will be sold in the U.S. in the next five years; C-Cube estimates that there will be one million DVD players and drives by the end of 1997; and Infotech projects 840,000 DVD video players will be sold in the first year. Though industry figures on numbers are an arcane science to say the least, industry watchers are dubious. "I don't know where they're getting these numbers from," said one industry analyst, declining to be named.
Perhaps a good test of these prognostications might be their own prediction for the number of software units that will be sold in 1998: it stands at 36.7 million. VideoScan, an independent industry organization which tallies sales of DVD software, said that only 382,000 units had been sold through September 15, 1997. Even given a wonderful Christmas, the industry will be hard-pressed to go through an almost hundred-fold increase in 15 months.
In all fairness, there may be surprises. VideoScan monitors only the numbers from retail outlets, not such non-traditional sources as mail-order houses. Could it be that pornography will lift this business in the same way that it boosted the VHS market?
The greatest danger to the DVD standard is likely to be created by the industry itself: hype, and its evil twin, disappointment. "I think DVD will have almost zero impact in any area this Christmas," worries developer Kathy Kozel, "and that may really knock out DVD ROM."
MGM is re-releasing two animated titles on DVD this month: How The Grinch Stole Christmas and Horton Hears A Who.
© 1997 MGM Home Entertainment.
Stage Six: Upgrade Or Die, The Coming Of DVD ROM
You foot draggers out there who moan with each computer upgrade you're forced into should get plenty of angst over whether to budget for a DVD ROM in the coming year or two. Described as basically a large CD ROM, DVD ROM uses formatting and layering techniques to deliver vast amounts more information on a CD sized disc. Let's make it simple: wait.
At first it seemed that the good news for consumers was that the bewildering array of video accelerator and sound cards, faster central processing units, and various compression engines have reached a plateau with the Pentium 2, MPEG2 video compression and A3 audio standards. However, let's not cheer too soon.
The issue of how content is organized on DVD ROM is in the hands of the Software Publisher's Association. This is apparently not as easy as it seems; issues of "backwards compatibility" with CD-ROMS and the continuing wars between hardware and software manufacturers continue to dog their work. Recently, Intel sponsored a conference through the Software Publisher's Association where hardware and software manufacturers met to try out their products on each other. The results were dismal. Don't look for plug and play capability from DVD ROMs for some time to come. Technology consultant and moderator of the most recent Software Publishers Association DVD forum Geoff Tully, points out that it will be awhile before DVD ROM are good for anything other than information retrieval. "As long as it's a bit bucket, it is only useful for transporting bits around." Tully commented, adding that the playback software is likely to be Microsoft's Direct Show that will operate in "Memphis" -- the next Windows environment from Microsoft. At last report, Memphis was due out next summer, but don't hold your breath.
[Interestingly, the e-mail between members of this group (or rather, its precursor, the Interactive Multimedia Association) finds Tully railing about a five year "life cycle" of a platform. Tully points out that such transitory formats make life impossible for software publishers.]
Even without these standards, title developers are releasing on this platform. The early offerings seem to be video-content heavy CD-ROM publishers like The Discovery Channel, who is planning to bring out their successful Animal Planet and other titles on the new medium. Tsunami has slogged through a pioneering experiment in interactive movie-making with Silent Steel (though the latter was a demonstration of the rejected MPEG1 standard) and plans a sequel. These companies are apparently grateful that someone has found a platform which presents full-motion video in a full-screen, quality format. The game-makers are jumping in as well. Westwood Studios is releasing Command and Conquer in the new format.
Don't look for a bevy of wildly creative new concepts from smaller companies right away, however. "The first wave of titles for the industry will be ports of older products," says Steve Dauterman, Director of Development for Lucas Arts. "This is very similar to the transition that happened when we moved from floppy disc to CD ROM." He adds that the new medium will help them with games that they ship on multiple CD-ROMs; they can now be shipped on a single DVD. Even considering the relative ease of porting products over to a new medium, however, Lucas Arts is taking a wait-and-see approach. "We're historically late adopters," shrugs Tom Sarris, Public Relations Manager for Lucas Arts, declining to name or date their first offering. "It may be 2-3 years."
Media watchers are generally sanguine about the prospects of DVD ROM in the years to come. "I think it's a solid upgrade for the computer," nods author Chris McGowan. "It's like a teenager," shrugged a systems analyst working for a major retailer, pointing to the lack of content for the new DVD ROM kits now available, "lots of potential, but no place to put it." Certainly, until the Software Developers Association (Gang of Ten: The Return?) publishes their authoring standards, or Microsoft releases Memphis and Direct Show, there is no reason to buy a DVD ROM.
But, no one in the industry is sweating that. The general hoopla for DVD ROM is scheduled for Christmas next year. Somewhere, in a cold and quiet corner of a northern toy factory, Santa Claus must be weeping.
From an upcoming Lucas Arts DVD ROM game. © Lucas Arts.
The Battles Continue: DVD RAM, DVD ROM, And Bandwidth
About all we can do here is define these terms and give a rough idea of why they make it tough to buy a DVD or DVD ROM this year. The developments in these formats are in the battle stage, and about as tough to track and report on as, say, the developments in Bosnia, Serbia, and Croatia.
DVD R, otherwise known as the "WORM" (Write Once Read Many) drive, will be a useful tool for industrial training, "one off" demonstration products, and educational purposes. These are DVD sized drives with the capability of recording to a disc one time only. DVD R drives will likely be of minimal utility for the average consumer.
DVD RAM, capable of being written to, erased, and recorded over many times. Hollywood Studios are about as receptive to recordable DVD's as Disney might be to a porno film featuring Mickey Mouse. The hardware companies, having just settled on a standard for DVD, are bashing each other again over this new format. See "Stage Two."
BANDWIDTH, or the issue of whether cable companies will be able to deliver full-motion video over fiber optic networks, is a question that seriously bedevils this industry. If you can play Command and Conquer against someone in Omaha at a fraction of the cost of a computer with an MPEG2 card and DVD ROM, why should you buy a DVD drive at all?
The Good News For Developers
In the past, the companies who brought out new platforms were in a panic to get developers to make products for their standard. Philips, for example, sponsored a Hollywood studio-like arrangement with up-and-coming content providers like Sidewalk Studios for their CD-I platform. There may be similar deals to come when DVD ROM hits the market.
Even if the big manufacturers should decide to sit on their wallets and let the studios fill out the content in these new formats, several potential revenue streams for animators, animation houses, and 3D graphics houses should open up. One example is the success of Odyssey Productions, whose popular Mind's Eye videos and collections of computer animations are now available on DVD. Additionally, the re-publishing of classic titles on DVD and DVD ROM should give new cash to struggling production companies to fund new projects.
Economic Democracy In Action
The glory of this whole process is that we get a vote. When we buy into a technology, we inherently reject one platform for another. My advice: sit tight.
It's not a good idea to buy an early DVD set-top machine unless you have $500 just burning a hole in your pocket. In the short term, DIVX may well take off next year and become an addition to the average machine, just as Dolby stereo became integral to cassette machines years ago. In the longer term, the broadcasters must settle their questions about High Density television, and specialized lasers need to be developed that will be compatible with this format. Finally, the growth in video on demand, Web TV, and fiber-optic networks (which promise to deliver full-motion video and interactivity) might well provide whatever application you were going to use that DVD for at a more reasonable price.
On the other hand, consumers are certainly subsidizing the growth of technology. If you feel that process is important, go and vote for the consumer electronics manufacturer of your choice. Perhaps, if the "trickle down" theory works, you'll be supporting a whole new generation of innovators, inventors, and artists. Then again, you might just be contributing to a vicious cycle.
For a humorous look at the history of failed technologies, take a look at Russel Bekins' illustrative charts, "Archeological Discoveries: The Year 3050," and "The Great Wrestling Match."
Russell Bekins is a writer and media and story analyst working in Hollywood. He has worked for such film companies as MGM, Tri-Star, CAA and labored mightily (not to mention fruitlessly) as a development executive at Disney-based Tidewater Entertainment. Most recently he has written for a satirical website, Betacapsule.com, detailing the despair of a small high-tech company.
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