news & analysis
Fears of noncompetition in
DVD market unfounded
Costs not connected to hardware
Followers of the digital video disk (DVD) standards battle may feel as though they have been on a harrowing jet coaster. For a little less than one year, two industry groups -- one led by Sony and Philips, the other by Toshiba and six allies -- have been taking the media for quite a ride. From Sony's announcement of the 3.7GB Multimedia CD (MMCD) standard in December 1994 to the announcement a month later of a second standard by the Toshiba consortium, and throughout the subsequent eight months of maneuvering for top position, the battle in the press between the two camps has kept the industry's attention. All that ended on September 15, though, with the announcement by the two sides that they will support a unified standard.For those with a keen sense of deja vu, all of this may seem familiar. Last year, in September, the Group of Seven (Toshiba, Matsushita, Pioneer, Hitachi, Mitsubishi, Japan Victor, and Thomson) supported a unified standard, but failed to bring Sony and Philips into the fold (see the accompanying timeline chart). The reason: money, of course.
The MMCD fell into the shadow of many of Philips and Sony's existing patents. The standard supported by the Toshiba camp, which eventually became known as the Super Density (SD) standard, tried to break many of those patents (covering a broad swath of audio CD and CD-ROM technology), while establishing several other patents owned by the group's members.
The final compromise standard, yet to be named, will be based primarily on the manufacturing processes championed by the Toshiba group: two 0.6-mm platters that are pressed and then annealed together. Aside from the possibility of applying the basic CD patents held by Philips, most of the manufacturing processes will be patented by members of the Toshiba group. The major concession to Sony and Philips is the use of their EFM-Plus modulation method, which allegedly improves the error-correction capabilities of the media and gives Sony another notch in its patent belt.
Considering that the original split was motivated by potential profit, and the sad history of consumers picking inferior technical standards (remember the Betamax vs. VHS video wars?), the fear of some industry pundits -- that a unified standard will mean an underdeveloped technology and cost the consumer more -- seems unfounded. The manufacturing and software patents involved in making the actual media are a minor factor in determining the overall cost of the product. A look at audio CDs and CD-ROMs will corroborate this: both are considered commodities.
The real cost "hit" comes from content. The movie and entertainment software makers that aligned with Toshiba were only interested in having quality media for conveying their message. And that message is the most expensive part. Unlike audio CDs, which have high replay value and encourage ownership, customers usually are more interested in renting or borrowing movies and entertainment software. This difference in usage means a difference in price, with copyright payments and content licensing making up most of the product's cost. (And considering Japan's relatively poor grasp of the economics and protection of content, few changes are in store for the future.)
No doubt, a big alliance means that more companies must divide the check. Yet, with the size of the market being predicted at several trillion yen by the year 2000, their profit will be small cuts of a mass-produced media. Content producers, as always, will set the price and determine the speed with which the DVD standard is adopted by the public. In the end, the absence of a second standard is better for the technology -- and better for the consumer. The content providers win either way.ç
Key points in the DVD battle
September 1994
Seven international entertainment and content providers call for a unified standard for a next-generation video media based on an optical disk.
December 16, 1994
Sony and Philips break away from the negotiations and declare their own standard: the single-sided 3.7GB Multimedia CD (MMCD) standard.
January 24, 1995
Seven manufacturers (led by Toshiba) from the US, Europe, and Japan announce their plan: a double-sided 5GB standard manufactured by welding two platters together.
February 23, 1995
Sony announces a two-layer manufacturing method that will allow creation of a 7.4GB disc that is readable from one side.
April 30, 1995
The Toshiba alliance announces that its Super Density standard will be used in computing applications.
May 3, 1995
Five leading US computer companies form the Technical Working Group and request the two alliances work together to adopt a single standard.
May 18, 1995
The Toshiba alliance announces a writable DVD, holding out the possibility of a near-future replacement for magneto-optical disks.
June 22, 1995
The Toshiba alliance creates the SD Standard Development Forum with the intent of popularizing its product.
August 14, 1995
The US's Technical Working Group makes a final announcement in support of a single standard before breaking up.
August 15, 1995
Sony approaches Toshiba with a proposal for a single standard.
August 24, 1995
Sony and Philips enter into negotiations with the Toshiba alliance aimed at unifying the standards.
September 15, 1995
At a meeting between representatives of the alliances, a basic agreement for unifying the DVD standard is announced. The standard, using Toshiba's production methods and a modulation method for better error correction developed by Sony, still lacks a name.
