And what is this sleek mystical platter? It’s called the digital videodisc, and it’s supposed to be setting the electronics world on fire. By now the Wiz and Circuit City were to be clearing the shelves for truckloads of newly introduced DVD players. Computer, video and record stores were to be readying racks for DVD games, movies and music. But don’t retire the old VCR quite yet, for this won’t be a very DVD Christmas. From concept to store shelves the supposed Next Big Thing has suffered an arduous odyssey. The world’s biggest electronics manufacturers have done battle over the technology. The behemoths of entertainment and computing have clashed as they struggle to reconcile tomorrow’s product with today’s business. Amid the pushing and shoving, the DVD has reached the edge of reality–but no farther. Says IBM executive Dan Sullivan, “The opportunity is so large that paranoia creeps in.”
The digital videodisc was born not because consumers demanded it but because manufacturers needed it. With households in Japan, North America and Western Europe stuffed with televisions, the industry was seeking a new absolutely must-have product. Hollywood, especially Time Warner, wanted to resell its zillions of old movies in a new form-just as music companies did when CDs came along. Everybody who’s anybody in electronics, entertainment, computers or software ultimately signed up-Sony, Toshiba, Philips, Matsushita, Time Warner, IBM and Microsoft among them. Their goal was to create a disc that could deliver oceans of data, sound and images on any brand of computer, movie machine or CD player anywhere in the world. The stakes are huge. Some forecasters predict consumers will buy millions of players and computers in DVD’s first year alone.
But whose players will they buy, and what software will they play on them? Starting in the early 1990s, two separate groups began chasing the DVD dream. Japan’s Toshiba, one of the world’s largest electronics and computer makers, joined forces with movie and music giant Time Warner. Sony, a manufacturer and a big player in movies and music, formed a competing alliance with Philips, the Dutch electronics company and part owner of the PolyGram entertainment empire. Each side gathered adherents, and the media world careered toward the worst possible outcome: two incompatible systems that would spit out each other’s discs. Fearing a repeat of the disastrous videocassette wars between VHS and Beta formats, IBM stepped in and pushed hard for a truce. Last year, amid much publicity, the two groups settled on a unified DVD.
Then into the picture Hollywood stepped front and center. The studios saw DVD not just as an opportunity but also as a threat. Using DVD’s ability to duplicate discs perfectly, pirates could break off a bigger chunk of the movie business than they do now with today’s fuzzy bootleg videos. No problem. Hollywood and home-electronics makers agreed to make the hardware pirate-proof and even proposed a law to Congress. Then the computer industry weighed in. The law and the pirate-proofing didn’t fly. Said computer makers: Sure, no movie copying, but don’t keep our customers from copying software; don’t tell us how to design computers, and besides, your solution doesn’t work. The anti-piracy plan went back to the drawing board. It’s still there.
Then there’s the problem of geography. In movieland, films are released in theaters, country by country, on different dates. After the big screen, the video goes on sale. For Hollywood to keep control m a DVD world, it wants players sold in one region to be unable to play DVD movies sold in another region. That would keep a French movie buff from having an American cousin ship over a DVD version of the next “Batman” sequel before the show opens at the Paris multiplex. The consensus solution: break the world into five regions, each with a different electronic code. But that’s where the consensus breaks down. MCA, which owns Universal studio, wants to be able to sell U.S. DVD releases in Mexico, sources say. Warner Bros. would put Mexico in a separate Latin American region.
Small potatoes? Not in Hollywood, where it all could mean very big bucks. The studios say they won’t release DVD movies until the players are pirate-proof and the regions are decided. Without movies, no one will buy the machines. Without buyers, the assembly lines won’t roll.
Officially, DVD’s backers are still optimistic. The piracy issue is near a solution, they say, and the geography mess can be finessed. Time Warner could begin producing DVD movies by late Oc tober, says Warner Bros. video ren Lieberfarb. Toshiba and others are sticking DVD players in the $500-to-$800 this fall, and Compaq Computer says fire up its assembly lines by the year-end. But behind the optimism is worry. Sony badly wants to launch players for the coming Christmas season. “But I have to say it’s getting more and more difficult,” says managing director Temaki Aoki.
Half of the entertainment industry, in truth, is in no great hurry to join the DVD bandwagon. Time Warner, Sony and MCA–each owned all or in part by Japanese equipment makers-count as DVD bulls. But such powerhouses as Viacom (Paramount’s owner), Disney and Rupert Murdoch’s News Corp. are far less enthusiastic. They don’t see compelling reasons for consumers to dump their videotape for digital discs. Jonathan Dolgen, head of Viacom entertainment group, estimates that U.S. families own some $30 billion worth of VCRs. “You just don’t change out of a $30 billion investment that quickly,” he says. Disney won’t comment, but industry sources say it won’t rush to release “Cinderella” on DVD. From Murdoch’s Twentieth Century Fox, a curt statement: “We will be in the business when it’s right.”
And why might DVD not be right? At today’s entertainment conglomerates, innovations that hold promise for one part of their business can harm another. Dolgen’s skepticism, observers note, may be related to the fact that Paramount’s sister company is video-rental giant Blockbuster Entertainment. If DVDs come on the market cheap, customers may buy them outright rather than renting. “The Warner Bros. guys are beating the drum” for pushing sales rather than rentals, Dolgen says, but ff it becomes a sales-only business, “DVD isn’t interesting to us.” Time Warner, however, has spent millions of dollars outfitting a disc factory in Pennsylvania. It could make a fortune just making and selling DVDs. According to internal Warner Bros. documents, it plans to sell DVD movies at $15 to $20, not much more than a video today. Time Warner has another reason for wanting to rush to market, DVD bears say. It wants to share patent royalties on every Toshiba DVD machine and on every disc sold by its rivals.
DVD’s woes hardly seem fatal. Once factories get the OK, they could start turning out DVD players and DVD-compatible personal computers in a matter of weeks. But between here and there stand countless multi-industry meetings. Minor problems will create major headaches. Thinking DVD for Christmas? Maybe Christmas 1997.
PHOTO (COLOR): Three men playing tug-of-war with a CD
The technology for digital videodiscs is here. But technical disputes are blocking the path to market. Among them:
Hollywood insists that DVD plsyers block movie counterfeiters, but the computer industry resists solutions that could restrict copying of software.
DVDs may use codes to keep Germans from watching American copies of “Tin Cup”; they’d have to wait for the European release and then buy the disc in Europe. But which countries will be covered by which codes?
Discs and players will be labeled “DVD-compatible,” with discs able to play on all machines. Beaware: compatibility testing is incomplete.
Ten companies control key DVD technology. They haven’t agreed on licensing patents to manufacturers.
