Inside looking out: observations from the Dark Side of the Industry

Computer Technology Review,  Sept, 2004  

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The great thing about this business is that: (a) It's the other guy who is causing all of the problems for consumers, and (b) It's the other guy who is making all of the money.

"They" are all correct. PC makers see the big bucks in consumer electronics and have begun to morph their products into entertainment/home communications systems. PC makers branch out into mediocre cameras/camcorders and LCD/plasma displays.

The PC marketers were quick learners and before the holiday season we all saw what Rob Enderle, principal analyst at the Enderle Group, called a backward condition for the industry where accessories were selling the computers. HP changed their systems to handle digital photography. Gateway came out with a family of digital cameras, camcorders and TVs. Sony has always ridden the wave of digital photography and video, as has Apple. Dell quickly jumped on board with a number of packaged solutions that included computers/ printers/ digital cameras/large LCD monitors and more.

While PC manufacturers only tested the waters with media center systems last year, they were serious about becoming mainstream consumer electronics competitors this year. PCs that didn't look like PCs were sold to replace stereos, VCRs, TV control units and more. InterVideo (long the leading producer of DVD player software) sold its home theater solution software into HP, Fujitsu, Hitachi, Sharp, Legend and other manufacturers' home entertainment systems.

As you might expect, Microsoft is also aggressively working to spread its tentacles into every part of your home. Fortunately there is an option, which many manufacturers are also embracing: open solutions Linux. This space could become very interesting over the next 12 to 18 months.

Burners to Burn

Today's DVD burners have become multi-writing hydras that all look fairly similar except for the names on the front. Burning speeds have hit 8X (10 minutes for a 4.7GB burn) and shortly they will be 16X (under 5 minutes to write a complete disc), with no increase in price.

Prices have dropped so rapidly for the DVD burners you buy today that Japanese manufacturers have all but ceased their own manufacturing and outsource it to Taiwanese and mainland China manufacturers. Korea's LG continues to be the world's highest volume manufacturer, but Taiwan's BenQ clearly has a goal to replace them as the leader. Next you have AccessTek (MSI), LiteOn, Quanta, AOpen and mainland China's TLS, Funai and SVA Group. Profits are so hard to come by that Pioneer and NEC have already moved much of their production to the mainland and Matsushita (Panasonic) will be there shortly.

Don't expect to see many of these names on the shelves of your local store. Instead, look for I/Omagic, Iomega, Apex, Memorex, Plextor, Digistor, Sony, HP, and a ton of super-cheap store brands. Oh and don't forget, they will be more readily seen as a standard part of your computer--Mac, Dell, HP, Gateway, Alienware, Sony, eMachines and, yes, store brands.

As if that wasn't good enough, in a few months we'll have burners that will write dual-layer (DVD-9) discs. CD (700MB) and DVD (4.7GB) media prices (especially R) are about as low as they can go and it is extremely difficult to tell good discs from bad discs until they have been written to ... then it's a little late.

Double Layer Coming

Double or two-layer media may be about double the cost of the single-layer discs that may sound a little expensive, but we are looking at 8.5GB vs. 4.7GB--double the capacity. In addition, it's going to be in short supply because double layer media is just very difficult to make and the early producers have only begun producing and shipping in any volume. It will take three to four months before volumes are increased to the point where it will be widely available. Still, it will only be available this year from a couple of media manufacturers.

The dual layer burners "should" be able to write today's discs--it's just a matter of controlling the intensity of the write laser. The discs will be readable on existing players (the units already read dual-layer movies). So expect the burners to be introduced with very aggressive pricing.

[ILLUSTRATION OMITTED]

Why? Well despite what your sales rep will tell you, making a two-layer writing burner instead of a single-layer writing device isn't that tough. All they had to do was change some of the firmware to control the laser diode's write/read strength. Previously, you had two strengths (write and read). With dual layer, the laser had to be controlled for writing to layer 0 and layer 1 and reading the data. That's it for the hardware.

The media? That's a whole different challenge because it required different dyes for the two recording layers, spacers and special metal reflectors. Then all of these components have to be put together in just the right manner and the correct automated production technique. Not an easy task, hence the initial limited availability of the media.