CDs thrive on recordability

Discount Store News, Jan 4, 1999 by Laura Heller

Fifteen years after the introduction of the CD, consumers are finally able to make their own recordings, and they are clearly thrilled with the prospect.

Recordable CDs are said to be flying off shelves this year, and manufacturers report they are scrambling to keep up with demand. But for all the recent furor, the truth about recordable CDs is that they're hardly new. Pioneer came out with the first consumer product nearly five years ago. Priced at a prohibitive $4,000, the then cutting-edge technology had an initial volume at retail that manufacturers expected would last two years--it sold out in six months.

Pioneer has released updated models every year since the launch and quickly dropped the price. The company's latest model carries a $599 SRP.

Despite the availability of the Pioneer product, it wasn't until Philips launched a massive marketing campaign in fall 1998 to back the introduction of its audio CD recorders that consumers really got excited.

Philips spent more than $100 million in the United States for its 1998 ad campaign. "It's the biggest campaign in the company's history," said Des Power senior director of marketing, audio systems, Philips.

In fact, manufacturers have reported that they can't keep up with demand in the United States. For instance Matt Dever, marketing manager, Pioneer home electronics, said his company is back-ordered until February.

Despite the supply shortage retailers are backing CD recorders in a big way Circuit City has a holiday brochure with Philips' newest product--a dual-deck CD recorder--on the cover, and Best Buy commercials are strategically placed m spots immediately following Phillips ads touting the technology.

Philips introduced the CDR 880, priced at $649, at CES last year in a limited launch, as not all Philips' accounts carried the product. It quickly followed with the CDR 760 at $499 and the CDR 765 at $649, which it touted as "the world's first dual-deck CD recorder." These follow-up products are now being distributed more widely--to national CE chains, for example. At CES this month, Philips will be unveiling the CDR 560S, its fourth product in the line The CDR 560S is a single-deck, mini-component recorder that fits in the ever-popular shelf systems. Everything else thus far has been compatible in size with component rack systems.

Pioneer's latest model is a single deck and at $599 carries a relatively high price tag "[While] dual-deck is getting lots of press, [we] don't believe it's a good product," said Pioneer spokesman Chris Walker. For the price of a single CDR machine and a 100-CD disc changer, the consumer can record from a bigger mix of sources in a shorter period of time, Walker said.

But combination products sell well, especially dual-deck products that remind consumers of tape-to-tape machines And manufacturers point out that with products such as these, it's important for retailers not to just sit them on a shelf and hope they sell themselves. Shelf talkers, brochures and informed sales associates are critical. To this end, Pioneer has a team of product specialists who do nothing but visit stores in an effort to keep staff up to date about product information. They visit at least once a month and try to keep one step ahead of the segments' notoriously high turnover rate.

Despite a promising future, there are still several flies in the ointment. The latest involves the new Home Recording Act, which requires all CD manufacturers to pay a royalty of 2% to 3% of the cost of the disc Add the alleged technology draw-backs, such as the fact that the format's blank CDs can only record audio, not data, and therefore aren't compatible with PCs, and you're left with considerable fodder for naysayers.

The royalty cost will be passed on to the consumer, of course. As of December, CDR discs were selling for $4 to $6 and CDRs for $20 to $25. But Philips will announce noteworthy price reductions at CES, Power said. And the royalty payment will be figured into those prices.

Not to be left out, the MiniDisc is another recordable media. And sales gains in this category throughout 1998 have been good, report retailers such as Best Buy Sony and other manufactures of the products have really gotten behind the technology and created increased awareness. And clearly there is room for both the MiniDisc and CDR.

"Where MiniDisc really shines is in portability," Walker said. The two technologies speak to two different uses.

"MiniDisc is not exploding, it is slowly growing," Walker said. But with deep-pocket companies shelling out millions in marketing campaigns, the entire segment is set for healthy growth in 1999.