A series of articles about what's happening in the home technology and DVD industry.

DVD Insider #18, #19 and #20

THE Insider

DVD Insider #18, #19 and #20
by THE Insider - an industry marketing/communications expert with more than 15 years of video, storage and networking experience.

A series of articles about what's happening in the home technology and DVD industry.

DVD Insider #18

Sometime - you know in all your spare time - you've got to take in any one of the trade shows around the globe. Two recent ones are right down your alley were CEDIA in Indianapolis and IBC in Amsterdam. CEDIA (Custom Electronic Design & Installation Association) is always in Indianapolis - who knows why - and IBC (International Broadcasters Conference) is always in Amsterdam - that's easy to understand. Of course you couldn't forget the Fall IDF (Intel Developers Forum) event where all of the chip people, system manufacturers, peripheral people and important people tell us what we can expect to see next year … and how good it is going to be for us.

Why are these shows so cool?

Want to see what production solutions will trickle down from the broadcast and super-pro users to regular people in a year IBC is the show. This stuff is so advanced it hurts your eyes and devastates your checkbook (or in our case credit card). Want to see what the rich and famous will be installing in their "homes" then CEDIA is your show.

Then the IDF people spend a lot of super techie time discussing how they are going to have us connected 24x7 at home, in the office, in the air, in the coffee shop. You get the picture.

IBC Production, Postproduction

The two are interrelated because it's all about content.

One thing you have to say is that the Dutch know how to throw a party. IBC highlighted digital cinema with eye and ear boggling projection technology, digital intermediate, new camera technology and audio developments. Way out of the reach of mere mortals there were a lot of hints from Sony, JVC, Matsushita, Thompson and others that we'll be getting portions of the technology this next year in the professional and prosumer products.

300 categories, 3,000 companies and some of the most fun, most exciting hardware, systems and software were on display. So what can "we" expect this coming year? 3D video production hardware will be really hot this next year for both prosumers and consumers. The new postproduction software is going to enable HD production for almost everyone and be very affordable. That means we're going to be able to see really bad personal and family videos very clearly.

While the rest of the world is already into streaming video (especially the Pacific Basin) it is just coming to Europe. That means the way the U.S. drags its feet we'll probably see it here in a couple of years. Internet TV is well established in Japan and Korea and there are pockets of it in Europe. Just might be the thing that drives the PC into the living room.

Bring It On Home

CEDIA was all HDTV this year. Well that and immersive sound, 3D video and ideas how you can always ensure you get the best seat in the house by owning the house.

While there are hundreds of new audio and video solutions for the common man/woman there are also those drop-dead set-ups for people who want to double the size of their home and never leave their home theater. Sure there was a lot more on home automation and home networking this year but the stars are always the huge ultra High Def screens (see some of the photos).

There is certainly a place for the do-it-yourself home theater/home network/home automation offering but we believe it is still something you'll want someone to install for you. Despite how easy Cisco, Intel and their cohorts make it sound wireless UPnP and content anywhere, anytime is a great idea that is still evolving.

With the growth of bandwidth to the home with cable, satellite and soon the Internet there seems to be an increasing demand for people to set their own viewing schedules. The networks and Hollywood are working hard to determine ways to track what you watch, when you watch it and that you don't copy that content and spread it around.

Content Moguls

In what some believe was a very creative and preemptive move; Sony not only has a big footprint in the content arena but has also done a very good job of closing the door on the DVD Forum's HD DVD format (20GB capacity). Their purchase of MGM gives them a film library that is bigger than even Turner's. With their push and the assistance of the 13 other Blu-Ray (25GB capacity) consortium you may be wondering where they will be storing their content this next year.

Sony made buckets of money over the past 20+ years on its CD royalties but hasn't fared well with the array of DVD formats. But tomorrow - more specifically the end of next year - is a brand new day. Not to be outdone, Toshiba, NEC and their backers formed the HD DVD Promotion Group to "promote development of HD DVD hardware and content, assure early product launches and promote the widespread commercial dissention of HD DVD hardware and software products in the marketplace."

Still looks like the race is too close to call.

The Road Coming Home

The best opportunity you have for getting a peek behind the curtain of products you'll see next year though is the Intel Developer's Forum. Granted a lot of the event is built around what Intel wants firms to design (it is their show after all) and our friends in Seattle but they have opened the horizons for all of us (illustration of home PC apps).

They were the driving force for the entertainment PC but the image is broadening as they gain experience and feedback. Slowly it is becoming an appliance and not a PC because well over 50% of the homes in the Americas don't have a PC and don't see a need. TV sets? Sure. Stereos, music collections? Darn right. Entertainment centers and home theaters? The number is rapidly growing.

Dell's human factors engineering manager, Keith Kozak, had the most realistic approach to the PC - CE challenge and who knows Dell just might be the PC company that gets it right. His chart showing the growing gap between ease-of-use and product features quickly showed that consumers really don't adopt the new technologies as rapidly as the engineers want us to because they are getting more complex, not easier.

Perhaps Walt Mossberg of The Wall Street Journal is right when he tears into proudcts because they don't focus on the real customer experience. Translation? Engineers spend more time talking to engineers about neat technology rather than people at home to find out how they are going to use the new product…out of the box.

Real people don't talk about WAP, WEP, HTML, IP address, SSID, DSL. If people still have a tough time burning a CD, how can these firms hope to possibly set up a wireless network without a lot of technical support? Now your entertainment center requires the connection of a few cables, running some wire or plugging in a couple of boxes that send the signals thru the air, plugging in the power and hitting the on button. TV sets are even easier because the number of wires are dramatically reduced.

To make Intel's vision happen companies have to make a rapid transition from the early adopters to the late adopters. DVRs are starting to do that. Apple's iPod (and all of their me-too options) did it. At CES we'll see products from a few firms that are getting the message. A few will be PC companies but most will be CE firms.

While the all-in-one solutions are great to look at, it's the modular approach that will catch on most rapidly. People want to remotely manage their content and stream it to the TV or stereo using the remote control.

Intel's president and COO, Paul Otellini, weaves a marvelous tale of how people will use their system to record their TV shows, play movies or games and stream content to their receivers. Of course that's once the MS OS has warmed up. Using the same or similar chips, the CE people are taking a different approach that you'll see at CES. You hit the button on the remote control and BAM! the entertainment center comes on and you stroll through your TV, movie titles or music library.

That's entertainment!

Firms like ADS Tech have taken a different road because of their multimedia background. These firms let consumers add special purpose devices to systems they already have. There are going to be a lot of exciting products like these at CES that people can add that are UPnP and home entertainment focused.

Media receivers wirelessly connect the PC in the den to the TV set. PVRs on the PC let you go out to the TV box and capture shows you want. People with camcorders connect boxes that let you put your content onto your HD entertainment library or burn them to disc. And the variety of these products continues but people add new capabilities as they want them rather than being force to commit to them all at once and then struggle to "learn it all."

The sanity check of IDF came strangely enough in the last day during what was to be the R&D segment. Pat Gelsinger, Intel's chief technology officer, had Vinton Cerf, often called the father of the Internet, on stage to put our connected world into perspective. Don't complain about the 52K connection in a hotel because five billion people have never connected at all. So downloading music or video are way beyond the majority of the market's reach. If they have digital they live in a CD and DVD world.

That won't change anytime soon so no wonder the RIAA and Hollywood are working on bigger and better ways to protect their cash cow content.

DVD Insider #20

HP and Microsoft have promised us yet another digital entertainment strategy that is going to create a whole new, breathtaking consumer experience. Can you wait?

But even before they could tell us how good it is going to be, Sony must have driven through your neighborhood and noticed that you and your neighbors are packrats and never throw anything away. Or they looked around Osaka and the other cities and towns of Japan and noticed there just isn't enough storage space in their small homes.

CEATEC Japan held a lot of excitement and even the 9th Typhoon of the season couldn't dampen the excitement. However, the high wind and rain did cause the doors to close early.

CEATEC Japan Unveilings

So at CEATEC Japan Sony took the weather in stride to introduce the VAIO Type X.

They know what drives the Asian consumer and what will ultimately drive the consumer in the Americas. Think of it. A system that can record six channels - simultaneously. This is the AV recording server that will have home theater owners drooling. It has an unbelievable 1 TB hard disk. Translate that? It's 2 years of nonstop music, one month of DVD movie play or for the techie 1,000,000,000,000 bytes.

It also includes a TV time machine function that lets you watch programs while they are being recorded (technically we call it time shifting but time machine is so cool!). Use your remote control to go back in time, rearrange programs by genre and enter key words to find specific programs.

It's being snapped up in Japan and the company will probably roll it out over here mid next year (2005). It won't be cheap but with that much power couch potatoes can easily justify the investment just to get every football and baseball game that is being played anytime, anywhere.

People in the industry think of CeBIT in Germany each spring and CES right after the first of the year in Las Vegas. However, CEATEC Japan is where the Japanese (as well as Korean and Taiwanese) engineers go to show off what they have done to all of their peers.

Screens Dominate

LCD and plasma TVs and displays seemed to dominate the excitement but then it is a lot easier to show and see great video than great chips. Sharp took the opportunity to show their huge 65-inch LCD TV got a lot of attention at the show. Everyone came to see the largest screen and the color brilliance.

There were screens and types for every taste and nearly every pocketbook.

But the real action all started with the new family of 0402 chips (0.4mm x 0.2mm) are something smaller than a grain of sand and will pave the way for new, bold and fun products. Then you add new networking technologies and out-of-body mobile device experiences. There were tons of leading edge business technologies unveiled but those that catch the eye and heart of people are the consumer and AV technologies.

One of the reasons the Pacific Basin countries have taken PCs and technology into every part of their homes and lives is that with the exception of big-iron mainframes, they don't distinguish between consumer and IT products. Instead these are products for individuals.

The network that is good enough, robust enough and easy enough to use in the harsh environment of the home should be able to withstand the rigors of the office. If your entertainment devices can exchange content (data) without a hiccup with wires or wirelessly then you and your boss should be able to communicate whether you're in the office or on the road. If you can transfer precious family images and memories between your camera/camcorder to DVD and your TV then you should be able to send production schedules and inventory control information to the factory floor, warehouse and accounting.

Naive isn't it? If the kids can't break it they think mature, responsible and reasonably intelligent adults should be in a position to be profitably productive with the tools.

Design, Delivery Flexibility

Since Japan finds it as difficult as the US to compete on the basis of price once products become mainstream, they have perfected the ability to plan and develop products with abbreviated ramp-up production cycles and then shift volume production offshore (China, Thailand, Vietnam).

The new products are typical of what we'll see on a global basis for successful firms that produce small-lot production for made-to-order and targeted markets of enthusiasts. As the products become popular they rapidly ramp up manufacturing to capture marketshare. As demand gains momentum manufacturing is shifted to low-cost centers. If demand slows they turn the production spigot off and move to the next generation of product with little or no remorse.

This year the show was dominated by the complete array of products designed for mobility - in the home, on the road, in the office. They made it a point to show and emphasize products you could use without wading through a user's manual. The screens, displays and TV sets are easy to view and when web site designers figure out that they are designing for readership/viewership rather than their own egos the stuff we see on our screens will be easy to understand without squinting.

Every company today struggles with challenges and roadblocks that are thrown up "for the good of the consumer." There are issues on whose standard is better (who gets the most royalties) and what standards groups will dictate direction. At the same time, content protection alliances work to maintain control over what you buy and use. Despite this, the manufacturers - around the globe - are working very hard to develop what can be called "work-arounds" so the products can be quickly, easily and economically integrated. People now understand and demand that products - AV, IT, home, Mobile and office - must be seamlessly and reliably connected.

Range of Options, Always Connected

Nearly all of the firms exhibiting at CEATEC - large and small - showed end-to-end solutions. But the big difference between these solutions and the Microsoft (and friends) approach is that you didn't have to go with a single source. The Type X server connected and worked with the giant Sharp screen that worked with the LG or Samsung DVD Recorder that worked with the Panasonic cameras and camcorders that worked with the… You get the idea.

Just as with some of the newest solutions being shown here today they were based on the UPnP and UPnP AV standards that ensured fast, easy connectivity and interchangeability.

Several of the wireless home entertainment solutions even showed how people could bring their older analog content forward by including ADS Tech's DVD Xpress and InstantMusic products. DVD Xpress is a set-it-and-forget-it VHS to DVD solution. The new InstantMusic is an iPod colored box that lets you copy (and clean up) your old vinyl music and store it on CD or your MP3 player to enjoy.

Connectivity and interchangeability is going to be a fundamental design criterion for everyone in the years ahead.

Digital Paves the Way All of the companies, solutions and products displayed at this year's CEATEC Japan focused on digital technology that had its humble beginning in 1982 with the introduction of the CD. Over the past 20 years digital has permeated every facet of our business, home and personal life.

Visually and audibly it is clearer than analog. More data can be sent so the quality can be further improved. Dimension can be added. Digital technology - very evident at CEATEC Japan - has clearly taken over business activities and home/personal entertainment.

While HDTV is slowly and painfully gaining a foothold here in the Americas, you can't sell anything but in the Pacific Basin countries and increasingly in Europe. Before it is assimilated here and probably just about the time Blu DVD technology takes ahold we got a peek at what the future has to hold.

It's called SHDTV - we hate it when acronyms aren't easy to remember/say - or super-high-definition TV. Think of a screen image that has 16x more data than HDTV. In the demonstration you suddenly understand what immersion video means!

But don't worry it is still a ways off.

Introducing the Closed Approach

Showing that the third time is a charm, HP joined the stage with Microsoft to rekindle the idea that digital entertainment was really what people wanted in their living room. But unlike the growing number of CE manufacturers who are ready to rollout digital entertainment proudcts at CES, they had a vague reminiscence of something we use in our home office…oh yes a PC.

The media center "solutions" were billed as your answer to accessing your music, your movies, your home videos and your photos on a single device (PC) with a remote control. Of course they weren't as elegant as Apple's new iMac (admittedly another closed solution) or as elegant/powerful as Sony's Type X.

But they do leverage HP's rich heritage in the PC and digital photo markets. In addition they leverage MS's new Media Center software which has enough of the Windows XP look and feel for some of you to find the solution comforting. However, it hasn't attracted the nearly 50% of the households in the country who don't have a PC at home and want an overwhelming reason to bring one home…at any price.

As IDC noted, of the more than 177 million PCs shipped this year only about 550,000 were media center PCs.

However, perhaps a digital entertainment system that touts a 1TB storage space might make us change from the office-based wireless solution we now have to something that sits atop (or perhaps behind) our HD set.

…We'll see

DVD Insider #20

Optical Storage

Everyone is now delivering 16x DVD burners at unbelievably low prices. Rushing to keep pace, the leading media manufacturers deliver the high-speed +/-R media as quickly as the formats and specifications are approved.

But, according to most senior engineering types we've finally reached the upper performance limit for single-sided 4.7GB media. There are discussions of jumping the speed to 18x/20x but among most content professionals there is always a concern about the integrity of the written data at excessively high speeds. They usually write content at a much slower speed so they maintain the highest possible quality.

While this exploration is going on, the media industry leaders were ramping up Double layer media production, Verbatim lead the pack on delivering the 16x discs. The initial 2x -R and 2.4x +R media has already been certified for 4 and 5x speeds. You have to wonder if the media coatings and processes were so robust at the outset if the media can be expanded to 8x without having to go back to the lab.

Now all of the major disc producers -Verbatim, MKM and others - are delivering 16x media and a few other firms have begun their DL production ramps even though the media even though only product from the two firms mentioned has been certified by the authorization group. The big difference is that the big volume burner producers are shipping 4x and 5x DL units and have already certified Verbatim's DL discs for these write speeds. There is some speculation that the discs were so over designed that it may be possible to write the 8.5GB discs at 8x. That would mean significant savings if they don't have to come up with new dyes, chemistries and processes.

The engineers and chemists are still working to see if they can reliably deliver 16x DL media but we believe people should be focusing more on the quality of the data laid down, not the speed.

One concept that will probably never emerge from the research groups is quad layer discs (15GB). The big challenges would be backward read comparability (probably won't happen) or simply encourage consumers to move on to new players. Of course they could simply put the project on the shelf and focus on the burners and media we'll begin seriously buying in 2006.

The major thing the industry analysts forget --as do the hardware/media manufacturers -- is that people don't immediately jump on every "new generation" or next greatest thing. So those Blu or HD burners may take years to become accepted except with the early adopters (you know those people who have one of every new/obsolete tech toy). Two hours of personal video from a DVD is a lot. 30 minutes of a kid's ballet recital on SVCD is excruciating. 24 hours of music on a single disc is "like way cool!"

We were recently asked - yes again - which had better compatibility + or -R. Honestly, that worry should be behind you. It is only a rounding error of the units that aren't compatible with both media. If there is an edge it is perhaps - and we emphasize perhaps - slightly better compatibility with +R. That's true of PC and TV top players.

DVD burner prices are in the basement. DVR prices - even with some mind-boggling features are right next door. Disc prices - even for quality, name brand media that is all people should buy for irreplaceable personal digital photos and family video memories - has come down dramatically in the past few months.

Even with the rising "no-name" production coming out of China the demand for the two classes of CD and DVD media continues to grow (see disc sales growth chart). The classes? Cheap stuff starting as low as $.10 - $.15 for CDR and not much more for the stuff they call DVDR. Brand media that have the reputation and distribution channels to maintain their lead and modest margins.

The quality media and bottom feeders are making it extremely difficult for those in the middle to survive. Expect to see factories close in both Taiwan and China this coming year when people buy in two categories. First there will be the ultra high speed single layer media and high speed DL (+/-) that will be economical and in volume from the brand name suppliers. Then there will be the slow speed, cheap media that only works in older burners/recorders. The in-between questionable stuff will sell for awhile but without the infrastructure, technology expertise and relationships the middle will painfully disappear even as sales volumes continue to rise.

Best of Both Worlds?

Speaking of discs, If you like CD music and you like DVD-audios, you're going to love the new sandwich that the music industry in LaLa Land has put together for you. Imagine a disc with one side a conventional music CD and the other a DVD-audio. (see display and initial discs)

If you want the disc in your car CD player that's great. But if you want to play the DVD in your home system you'll have pop your trunk and unload your cartridge. We're not certain if we'll keep ours with our CDs or DVDs…tough choice.

Of course the idea of doing something logical like putting two discs in a single jewel case never crossed their minds. Fortunately, the party line from the "sponsors" is that consumer response in the test markets has been "overwhelmingly positive."

If you're not into the idea of buying a second copy for the home or car you can always rip a copy of one or both to CD-R or DVD+/-R media. We don't like that idea but your only option seems to buy another music industry sandwich which doesn't sound appetizing.

Download vs CD Music

If you believe Apple, Sony and Sir Richard Branson, the world is abandoning CD music for single song downloads. Today there are more than 20 online services that allow you to legally or illegally download music to your portable music device. The sound - slightly less quality than CD - seems to be good enough for a lot of people.

While RIAA says that the downloads are killing the music industry the truth is that less than eight percent of the music people enjoy is downloaded. The rest of the digital music is purchased at retail. Jupiter research forecasts that CD sales will continue to dwarf downloads thru the remainder of the decade. They point out that CD player and system sales will continue to dwarf the sale of MP3 and other digital music players.

In that same vane NetFlix and TiVo have joined forces to deliver video-on-demand and more than a dozen other VOD services - including those offering video to cellphones - have emerged. Watching video on a cellphone screen is painful at best. 7-inch DVD player screens are "tolerable."

Once you've seen HD are you going to tolerate the grainy quality of these small screens? Worse yet VOD demands big pipes and so far those only exist in Japan, Korea and a few areas of Europe.

With people now migrating to home entertainment, home theater systems as well as HighDef and rich immersion/surround sound; quality may return to our audio/video content.

Making a Buck With Burners

While brand name "producers" can make a few cents profit on their DVD burners based on their name and reputation, the people who actually assemble the units - BenQ, Lite-On, AOpen, MSI and a few others -- are only able to sell on the basis of price. But most of these Taiwanese producers saw the writing on the wall and were able to make their own DVD recorders (DVRs) and earn a little better margin.

The units without hard drives in them went nowhere so now all DVRs also have hard drives. Consumers, speaking with their credit cards, are saying the more drive capacity the better. In 2004, more than 15 million DVRs have been sold and over 70% contain a HD. While the units started out with 20GB drives, demand quickly dictated that people wanted 40-80GB drives and we're seeing a lot retail action for the 250-300GB HD-based units. HDs continue to be the backbone of most applications.

The great thing is that once people start using a DVR they stay with it. According to Forrester 60% of the people who have these devices use them all the time and (surprise) they skip 92% of the ads.

This entertainment server evolution hasn't gone unnoticed with the PC manufacturers and the first of the year we'll see PCs that look like DVRs with brains, huge memories (500+GB), network capabilities and more. The biggest challenge for these producers is understanding what CE manufacturers already know - you don't leave the unit run all the time (MS solution to the warm-up problem), it has to come on instantly (that means a Linux kernel) and it has to be whisper quiet.

The second challenge for the PC manufacturers will be to resist MS "influence" to ensure the system in the living room is really a PC first. Too many seem to forget that PCs have only penetrated about 50% of the homes and that number has remained relatively constant despite the ready availability of $200 - $300 "computers."

Next Year's Winner

Wonder what the next great storage solution will look like? Here's a big hint - it will be Blue. More specifically Blu!

The Forum, NEC or Toshiba probably won't concede but it certainly appears that if you want to be at the leading edge in your neighborhood you'll be buying a Blu-Ray burner next year. More than 90 firms have climbed aboard the Sony/Matsushita bandwagon - along with HP, Dell, JVC, Samsung, LG, Pioneer, Philips and 90% of the CE manufacturers. (check the initial products)

The association's position - BDA (Blu-ray Disc Association) is that it is the right thing to do for content owners and consumers. You believe that then we've got some swampland we want to sell you.

But when the technology hits the street it will be good for the content owner (Sony and all of its content). Don't pull out your credit card just yet though because the initial burners (now selling in Japan) will be about $2000 and discs (25-30GB) will be $35 apiece. Then too you'll also have to buy a new player and so will all your friends.

Translation…expect DVD to be here for years!

Most Drives Still Spin

Synonymous with timeshifting TV programs, TiVo was the first company to get serious about non-computer use of HDs. Since then home AV use has developed so rapidly that now they are used in everywhere…car navigation systems to the latest cellphones and everything in between. Apple's iPod music player's HD can hold as many as 15,000 individual selections, presuming you have the time and energy to transfer that many tunes from around the globe.

Hard drives come in many sizes, capacities and versions. The recording medium is a metal or glass disk, coated and recordable on both sides. The platters can be as small as 20mm (0.8 inches) and as large as 130mm (the good old 5¼-inch). Most however are 65mm (2.5-inches) or smaller.

Most drives have multiple platters - 2,3,4. In 2003, it was estimated that about 360 million platters of all sizes were produced for about 250 million individual drives (see growth chart). This means the "average" drive contained 1.44 platters.

Much of the development work in disk drives over the past ten years has been in increasing the areal density and improving the magnetic heads that write and read the data. The areal density of a hard drive has jumped from 1GB/sq in five years ago to today's 100-150GB/sq in. Two orders of increase (100 times) is amazing and engineers say they can improve capacities 100 times or more in the next five its easy to see these little suckers aren't going away.

Cheap huge capacity drives will become the home network entertainment solution this coming year - wired or wireless. Think of a small enclosure sitting on top of your home theater with all of your music, photo albums, personal videos, archived TV series and movies stacked up waiting for you go pick and choose your favorite at will.

Possible? Sure.

Under a grand? Wait till CES!!

Billion dollar question is will be can you do it all with the remote or is someone going to "suggest" you continue to use the tired old keyboard?????

Sometimes we tend to listen too much to the "logic" of engineers !!!

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