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page updated: 1/16/01

The Bits @ VSDA/CES 2001

Page 1, 2, Picture Gallery

So now that we've taken a look at the software side of DVD, what's in store for the format as a whole in 2001? And how did it fare in 2000? To answer those questions, we attended the DVD Entertainment Group's annual reception at VSDA. The event serves as a sort of cocktail party and "state of the industry update", and the attendees are a mix of studio and manufacturing executives and press. This year's event was held at the House of Blues Foundation Room at the Mandalay Bay Hotel. And the focus was very heavy on DVD-Audio, with speeches given by Rusty Osterstock, the General Manager of Panasonic Consumer Electronics, and David Mount, Chairman and CEO of the Warner Music Group. There were also several demonstrations of DVD-Audio at the event to experience.

To give you a better sense of just how fast the DVD format is growing, here are some DVD-Video numbers to consider from 2000 (source: CEA and the DVD Entertainment Group). First of all, more than 310 million DVD software units have shipped to consumers since the format's launch in 1997, 182 million in 2000 alone. That's roughly double what was shipped in 1999, which saw 97 million units. There are currently more than 8,500 titles in Region 1, a number the industry expects to top 10,000 by the end of 2001. The industry also saw its first single title to ship more than 3 million units initially - DreamWorks' Gladiator. And the hardware numbers are even more dramatic. In 2000, the number of stand-alone DVD-Video players shipped to retail in the U.S. (since the format's launch) topped 14.5 million, with an estimated 90% or better installed in homes (that's even better than the industry expected - CEA had to revise their projections for the year 4 times). By the end of 2001, the industry estimates that the number of players shipped since format launch will top 27 million - almost doubling the size of the DVD market. But that's just stand-alone DVD-Video players. The industry expects some 20 million DVD-capable hardware units to be shipped in 2001 - 13 million stand-alone DVD-Video players, 500,000 combination DVD-Audio/Video players and 6.5 million DVD-based video game systems. If you think those are dramatic numbers, consider this - the DVD format as a whole is by far the most successful home entertainment format ever launched in the history of the consumer electronics industry. It's first four years' sales pace is more than 7 times as high as VHS and more than 3 times better than the CD. And not only is DVD successful, it's impacting other home entertainment areas as well - sales of home theater equipment (TVs, receivers, speakers and the like) are all enjoying a boost from DVD.

But we all know that DVD-Video is a success. What are the prospects for DVD-Audio in 2001 and beyond? Well... clearly the industry is very excited about it. All of the major music labels, including the Warner Music Group (Warner/Elecktra/Atlantic), Universal Music Group, EMI Recorded Music, BMG Entertainment and Sony Music Entertainment are firmly behind the format, as are independent labels like the 5.1 Entertainment Group. And nearly all manufacturers have (or are planning to) produce players capable of playing both DVD-Video and Audio discs. Only Sony resists, preferring instead to promote its Super Audio CD (SACD) platform. In fact, more than 30 DVD-Audio/Video combination player models are or will be available in the first half of 2001 (based on announcements made at CES). Warner Music claims that sales of the 15 DVD-Audio titles they released in late 2000 exceeded their expectations (although no hard numbers were given). The company expects to begin making standard day-and-date DVD-Audio/CD releases on most major titles in 2001, now that recording and mastering facilities have been upgraded to handle the new format (you should also know that the "super jewel box" has been decided upon as the standard packaging for DVD-audio, to differentiate it from CDs and DVD-Video discs). And the creative talent involved in making music is very enthusiastic about DVD-Audio. Musicians and engineers such as Ry Cooder, Mick Fleetwood, Elliot Scheiner and Neil Young gave testimony about DVD-Audio via video, and the band Dishwalla was on hand as well (they're currently recording their next album for both DVD-Audio and CD release). Fleetwood describes the DVD-Audio experience as creating, "a sense of being part of something - the live experience." Young even went so far as to say, "CDs were a mistake from the beginning. After you noticed the lack of surface noise, you started to notice a lack of sound, warmth and everything you associate with air. DVD-Audio is simply the best we've ever had for experiencing music in the home..."

So the artists, manufacturers and the industry as a whole are excited about the prospects of DVD-Audio in 2001. But here's the question that remains in my mind - what about consumers? At the moment, adding DVD-Audio compatibility to a player adds a significant price increase to its cost - something in the neighborhood of $500 extra. Certainly, there are high end audiophiles who will be willing to pay that. But what about regular consumers? My guess is not. One industry executive at the show remains hopeful on this issue. Currently, chip manufacturers are adding DVD-Audio to players by adding a second processor. However, later this year, chips will be available that will process both DVD-Audio and Video streams, which means that DVD-Audio could soon become was universal on a DVD player as DTS compatibility is now. Then, and ONLY then, will DVD-Audio have a real chance of success, in my opinion. When a consumer can take home a DVD player in the $300 range that plays BOTH Audio and Video, they might be tempted to try a few DVD-Audio discs and get hooked.

But all that aside, there's still the psychological issues to address. Clearly, the move from VHS tape to a 5" DVD-Video disc makes sense to consumers. It's a tangible upgrade from a physically clumsy and flimsy medium to a more sturdy one. But will consumers appreciate the difference in going from a 5" CD to a 5" DVD-Audio disc, that looks (for all practical purposes) physically identical? And I have to admit that I'm still having a hard time listening to studio music in 5.1, when I've been conditioned by years of radio and CD play that music should be heard in stereo. It's much easier for me to accept a live recording in 5.1, where you're truly trying to simulate the "live" experience with ambience and the like. Here's a non-DVD example that will illustrate this problem. I recently picked up the 24 bit, 5.1 DTS music CD version of The Police: Every Breath You Take - The Classics. And while I'm a huge Police fan, I'm still not sure if I like hearing my favorite songs in surround sound. Don't misunderstand me - it's a great recording. But it just seems fundamentally wrong to hear Stewart Copeland's high-hat shifting around the room, and his and Andy Summers' backing vocals coming out of the rear channels. It's going to take time for me (and, I think, consumers as a whole) to retrain a stereo-conditioned brain to accept the 5.1 music sound.

The bottom line to all of this is that I do believe DVD-Audio will take wings and fly as a format. Personally, I'm already sold. For the first time, you really feel like you're in the room with the musicians. Clearly, there is a tangible difference in the perceived audio quality between CD and DVD-Audio. But will more than a small fraction of consumers even have the kind of audio equipment (receivers and surround sound speaker systems) necessary to enjoy the improved sound quality of DVD-Audio? And if not, will the discs themselves boast the kind of supplementary materials that often justify DVD-Video purchases in consumers' minds? All of these things remain to be seen. As I said, I do expect DVD-Audio to succeed, ultimately. But I don't think that's going to happen until the player price point drops significantly, hopefully later this year. And I don't expect the growth curve to match that of DVD-Video. The road to 5.1 music becoming common is going to be a long, slow one.

Another question a lot of you are probably asking, is what's up with Recordable DVD? Well, the industry definitely isn't talking about recordable much going into the new year. But a few players ARE starting to come to market. Panasonic is among the first manufacturers to support the developing DVD-RAM standard (which means that DVD discs recorded on the player are compatible with computer DVD-RAM drives, but NOT existing DVD-Video players). Their DMR-E10 DVD player/recorder is now available... albeit at a hefty $3999 price. Pioneer also expects to release at least one recordable unit here in the States in the first half of 2001, this one based on the DVD-RW format (which means that the player's discs can be reused many times and SHOULD be compatible with MOST current DVD-Video players and ROM drives). Then there's the DVD+RW format, supported by still other manufacturers. Which version of the recordable DVD format will win? Well... conventional wisdom suggests that Pioneer's more compatible format has the advantage. But it remains to be seen what direction the manufacturers as a whole will take. And then there's Hollywood, which still gets the heeby-jeebys whenever you ask about recordable digital formats, due to the complex copyright issues involved. Bottom line here - recordable DVD will arrive in 2001, but you're going to pay a hefty price for it and you run the risk of having your gear made obsolete if you commit early. With any luck, we'll see some format standardization in 2002, which should lead to wider industry support and more consumer-friendly prices. Recordable DVD is definitely coming, and we here at the Bits think it's the future. But it's still a little ways off yet.

In terms of other DVD hardware news at CES, look for lots more portable units to arrive in 2001 (including car units), along with wider support for the Nuon feature and many more styles of combination/multi-disc changers and all-in-one boxes with DVD capability. DVD will even take flight into space in 2001 - one model of Sony personal portable DVD-player has been selected by NASA for use on the International Space Station. I knew there was a reason I wanted to be an astronaut when I was a kid... ;-)

The last thing we should probably address here is the status of Digital Television (DTV), including the fate of High Definition Television (HDTV). Let's make it clear what we mean by the two. DTV is an inclusive format which encompasses a variety of different types of signals, all of them digital. Therefore, a DTV is required to be able to display standard-definition digital signals, as well as enhanced-definition (like 480 progressive) and true high-definition (HDTV, like 1080 interlaced). The Consumer Electronics Association had estimated that some 425,000 DTV units would be sold to consumers in 2000. In fact, roughly 600,000 sets and monitors were sold - an impressive number given their high unit prices. Two primary obstacles stand in the way of widespread acceptance of DTV - the pace and willingness of broadcasters to convert to digital and the price of the televisions to consumers. 2006 still remains as an FCC mandated target date for total industry conversion to digital broadcasting, but given the current progress, analog broadcasts will probably continue far beyond that time. Currently, more than 60% of the population of the U.S. is able to receive some kind of off-air digital broadcasting (via satellite service). But CEA estimates that DTV penetration in U.S. consumer households will only reach 30% by 2006 - a statistic that will clearly prolong the time required for full digital conversion. Still, DTV sales are accelerating, and that trend will only continue as the equipment becomes more affordable. In fact, you may be surprised to learn that Zenith plans to introduce an integrated DTV in the second half of 2001, that could retail for under $1000 - a major milestone for the format if achieved. And in November, the CEA also petitioned the FCC to finalize the DTV broadcast standard. Currently, many broadcasters would like to use the wider high-definition bandwidth allocated for DTV to send out a larger number of standard definition digital signals (which would allow them to make more money via advertising). Only one broadcast network (CBS) is aggressively sending out an almost complete primetime schedule in true high-definition. And only 2 networks broadcast 24 hours in HD - HBO and Showtime (but only via satellite service). That may come as a surprise to consumers, many of whom don't understand the distinction between DTV and HDTV - they're all expecting to see higher-resolution pictures as the norm.

Here's another important issue to watch - CEA has also asked the FCC to mandate that cable companies carry both DTV and HDTV signals. Currently, more than 70% of U.S. households get their primary TV signal via cable, but virtually none of that is truly designed for DTV reception (you've probably heard the term Digital Cable, but this is misleading - the signals may be "digital" to the set-top box, but they're converted to analog there for use with standard TVs - the signal is not designed to take advantage of actual digital televisions). And none of it is high-definition. If the FCC does require cable companies to carry DTV and HDTV signals, and prices continue to drop, the pace of DTV sales should accelerate dramatically.

As far as major network support for high-definition digital broadcasting (1080i), here's the current status:

ABC - 0 to 3 hours a week (varying) of sports or movie programming, CBS - 15 hours plus per week of primetime programming, including 17 of its 18 weekly primetime series, all 35mm originated movies and extensive sports programming (including the Superbowl and NFL playoff games), NBC - 5 plus hours a week (The Tonight Show and the occasional special), Fox - none (although they do broadcast some programs in 480p), HBO - 24 hours a day, 7 days a week via satellite on 2 feeds - HBO East & West HDTV (roughly 60% of movies are originated in 1080i, with the remainder upconverted to 1080i from 480i - also the second season rebroadcasts and upcoming third season of The Sopranos will be shown in true HDTV), Showtime - 24 hours a day, 7 days a week via satellite on 1 feed - Showtime-HD (all movies), DirecTV - 24 hours a day, 7 days a week (HBO East & West HDTV, HD-Pay Per View and Showtime feeds), EchoStar - 24 hours a day, 7 days a week (HBO East & West HDTV and Showtime feeds)

Bottom line on DTV and HDTV - the conversion to fully digital broadcasting here in the States will continue, slowly at first but with increased momentum as prices drop and accessibility increases (particularly if cable TV is required to participate). DTV broadcasting will probably remain a mix of standard, enhanced and high-definition, but as more consumers get on board, they'll start to get more vocal and demand greater high-definition support from broadcasters. However, achieving full conversion to digital broadcasting in the U.S. will take far longer than the 2006-mandated target date. Look for it to happen closer to 2015.

Now then... we've covered both the software and hardware end of things at VDSA and CES. It's time to take a look at some pictures from both shows! So check back soon for our Picture Gallery...

Page 1, 2, Picture Gallery

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