Business

The future of home video

In a few years, the VCR may be obsolete

ERIK HEINRICH July 22 1996
Business

The future of home video

In a few years, the VCR may be obsolete

ERIK HEINRICH July 22 1996

The future of home video

In a few years, the VCR may be obsolete

Business

If Minoru Morio, head of technology at Sony Corp., seems a little edgy these days, he has good reason. This fall, his company and others plan to hit the North American market with what is shaping up as the biggest breakthrough in home entertainment since the introduction of the compact disc in 1982. The wonder gizmo is a machine for playing digital versatile discs (DVDs), a kind of souped-up CD that can store from two to eight hours of high-definition video. Few people outside Morio’s industry have heard of DVDs, but the hard sell is about to begin.

Sony and a host of rivals, including Toshiba Corp. and Matsushita Electric Industrial Co. Ltd., will make sure of that. The industry has sunk billions of dollars into the development of DVD technology, betting that it will change the way people watch movies at home in the same way CDs have altered the way they listen to music. To set the stage for the rollout, all the major industry players—including the big Hollywood studios—agreed last fall on a common format, averting a costly replay of the VHS/Beta war that raged in the early days of the video cassette recorder.

Their spirit of co-operation is born of necessity. It has been more than 10 years since the consumer electronics sector had a winner, and industry leaders say a new piece of hardware to whet consumers’ appetites is long overdue. In Canada, sales of color TVs and VCRs are flat—averaging about 1.5 million and 1.2 million units per year, respectively. Meanwhile, sales of CD players have been dropping, to 273,000 units in 1995 from 397,000 in 1992. Oth-

er markets around the world are in a similar slump.

Little wonder, then, that the industry is touting the DVD as a quantum leap forward. Today’s audio CDs and computer CDROMs can hold 680 megabytes of information, the equivalent of about an hour of music or lowresolution video. DVDs are the same size, but because they can be recorded on both sides in a new high-compression format they can hold up to 26 times as much data—in techno-speak, about 18 gigabytes. That is enough for eight hours of video,

28 hours of audio or an entire library of computer software.

Still, a sleek new technology is no guarantee of success. And if the recent poor sales of laser discs and mini-CDs are anything to go by, the DVD format is in for an uphill battle. “VHS may one day be replaced by DVD,” Morio says with guarded optimism at

his company’s headquarters on the southern outskirts of Tokyo. “But as you know, VHS is a recordable format. At this point in time, DVD is not.” And for good reason. While it is technically feasible, a recordable format would make DVD machines too expensive, at least in the near future. Then there is the problem of copyright protection. A recordable format would make it easy for people to pass around high-quality copies of their favorite movies and shows—to say nothing of what the software pirates could do.

Morio’s worries are echoed by Rob McKenzie, video buyer for Toronto-based Sears Canada Inc. “DVD technology won’t be a home run for the consumer electronics industry until it’s recordable,” says McKenzie. Nevertheless, Sears Canada plans to sell a selection of DVD players—priced initially in the $700 to $800 range—throughout its 110 stores. DVD titles for those players will cost about $30 each. Eaton’s, taking a different approach, will sell DVD hardware in about half of its 100 stores. Before going into this in a big way, “we want to measure consumer response,” says John Eaton, spokesman for T. Eaton Co. Ltd. “Is it going to replace VCRs? Probably not immediately.”

Music retailers are not expecting DVDs to become an overnight success either. But they are prepared to let consumers know they have arrived. “We don’t plan to make a lot of money off this,” says

Bob Williams, vice-president of marketing at HMV Canada. “But we’ll probably set up displays with hardware at some of our stores. The point is to make a statement: find out about tomorrow today.” Jason Sniderman, vice-president of Sam the Record Man, a Toronto-based operator of 98 music stores, says his company plans to sell DVD titles at its flagship video locations in Vancouver, Edmonton, Toronto and Montreal. But he does not expect many people to make the jump until the price of a player comes down to about $300. “It has to be affordable,” says Sniderman. “If they want to mass-merchandise the software, they have to mass-merchandise the hardware. It can’t become something exclusive.” Ironically, the video-rental industry is for the time being upbeat about the format, even though DVD manufacturers hope to persuade most consumers to buy their movies rather than rent them. ‘We want to give customers exposure to this new medium without the associated cost,” says David Newman, vice-president of sales and marketing at Vancouver-based Rogers Video, a subsidiary of Rogers Cablesystems Ltd. Some of the 155 Rogers Video outlets in Western Canada and Ontario will rent DVD hardware and software as it comes on the market. “I have no fear that

MISSING THE MARK

Some high-tech innovations that failed to live up to their original promise:

Laser disc - When it was introduced in 1981, many analysts assumed that the laser disc would become the most popular system for playing movies at home. Instead, it was overtaken by the VCR, and is now favored mainly by video collectors and other high-end users.

MiniDisc - Launched in 1992 and touted as a replacement for the conventional cassette tape, the MiniDisc offers 74 minutes of "near-CD quality" audio on a 64-mm disc. Available in two versions—prerecorded and recordable—it is popular in Japan, but has not caught on in North America.

DAT - Digital audiotape, heavily hyped in the mid1980s, offers recordable, high-quality digital sound on a tape half the size of a compact cassette. But because it is more expensive than conventional tape, it is used mainly by music professionals and some audiophiles.

CDi - An interactive compact disc format used to play movies, music and video games. Unveiled in 1991 by Philips NV, CDi has fallen flat, in part because of the boom in personal computers and a new generation of faster video game machines.

DVD technology will hurt the VHS business in the short or medium term,” says Newman. “What it’s going to do is create a whole new customer.”

There is no arguing the DVD format’s superiority over VHS. Not only is the sound and picture quality better, but DVDs will not wear out. They can also carry eight audio tracks and display subtitles in 32 languages—as well as making it possible for viewers to flip between different camera angles and choose from a selection of possible movie endings. Moreover, DVD movie players and computer drives will also be able to play CDs and CD-ROMs.

That is all well and good. But more than 90 per cent of Canadian households already have a VCR, the technology works, corner video stores carry an abundance of VHS titles and consumers can use their machines to tape Seinfeld or ER when they are not at home. “One of the reasons laser discs failed to take off is that there wasn’t enough software,” says Lindsay Takashima, an executive at Markham, Ont.-based Toshiba of Canada Ltd. in charge of DVD marketing. He expects there will be at least 100 DVD movie titles when the technology is introduced later this year, but some analysts believe that is wishful thinking.

Michael Heiss, a consumer electronics consultant based in Los Angeles, says that Hollywood is running scared over the issue of copyright protection. “The movie studios have

realized they’ve created a monster,” says Heiss. Indeed, a DVD movie title is a perfect master for software pirates. They can use it to make high-quality videotape copies, or bootleg reproductions at unlicensed DVD factories in southeast Asia. If those pirated versions become available in Europe ahead of a film’s theatrical release, they would cannibalize box-office sales. “Digital technology has created an enormous headache for the motion-picture industry,” says Fritz Attway, senior vice-president of government relations for the Motion Picture Association of America, which is lobbying Washington for tougher copyright laws. “The best we can do is limit the impact.”

One proposed solution is a digital code that will prevent discs purchased in one part of the world from being played on machines sold in another. But even if that hurdle is overcome, there is the problem of the Internet. In theory, computer users could post excerpts from their favorite movies on the World Wide Web, where they would be available for downloading anywhere in the world. Until Hollywood gets its head around those issues, there is unlikely to be an abundance of DVD movie titles for sale. The question is: who will buy the hardware if there is a shortage of software to play on it?

ERIK HEINRICH