The DVD player market will grow steadily over the next several years, as more mini-component, home theater-in-a-box, and mobile DVD systems are introduced.
However, questions remain regarding a high capacity DVD format, which has yet to be standardized, as well as high-fidelity/multichannel audio formats and recordable DVD formats, which have both been in products for over a year. In order for the market for the latter two to grow, the selection of brands, models, and price points must increase.
For a basic player without additional features, the bill of materials is already under $100 and is rapidly approaching $75. As new features are added to DVD players, DVD back-end chip solutions evolve as well to add support for progressive scan, MP3 decoding, DVD-Audio, interactivity, and web browsing. In most cases each new generation DVD decoding solution brings more features at a lower cost, enabling a reduction in the bill of materials each year. Many of the additional features mentioned above do not cost extra to add to the player but they do enable manufacturers to charge higher prices at retail.
Internet browsing on a DVD player has not taken hold with manufacturers or consumers, but other interactive services show more promise. The ability to viewing Kodak Picture CDs will be available in several models. The DVD Forum is also developing an enhanced content standard for discs that will enable consumers to use interactive content on DVD players as well as DVD drives on the PC. With interactive content, Internet access may become more prevalent though it will be specific to the content such as being able to upload pictures from a Kodak Picture CD to the web.
While high capacity DVD recorders capable of recording high definition TV have been demonstrated, it will be several years before they are available. Copy protection will be a sticking point with content providers. A high capacity format will enjoy a much larger market if there is high definition content available for playback. Offering a larger recording capacity will not be enough to move high capacity recorders into the mainstream consumer market.
The high-fidelity, multichannel audio formats, DVD-Audio and SACD, are being pushed into the market by manufacturers wanting to differentiate products rather than being pulled in by consumer demand. Prices of audio players have declined quickly, but the content is not there. At presstime there are only 250 SACD titles and 105 DVD-Audio titles available in the U.S. Neither amount is enough to have consumers wanting the feature. In contrast, by the end of 1997, the year of DVD player introduction, there were over 600 DVD movie titles available. Many movies were available on DVD as soon as they were released on VHS. This has not been the case for either audio format.
Each format has an advantage in the market. SACD has more backing from music companies than DVD-Audio. However, DVD-Audio is presently less expensive to add to a DVD player, which encourages more manufacturers to do so. However, demand for either format may never be high. Many consumers do not have the necessary surround sound equipment to take advantage of either audio format’s multichannel surround sound ability. Also, most of the time consumers do not sit in one spot to listen to audio recording unless they are in the car. Yet surround sound is the most notable feature of either audio format for the non-audiophile mainstream market.
DVD recorders are now available from each of the three groups backing different DVD recordable standards, DVD-RAM, DVD-RW, and DVD+RW. The format of the recording is being kept out of all advertising instead emphasizing to consumers that this is a DVD player that is also capable of recording. If consumers do not pay attention to the format and instead vote with their wallets based on DVD recorder and media pricing, the most affordable products will win the format war not the most compatible or the one that makes the highest quality recordings.
Panasonic has the advantage in pricing with the DMR-E20 retailing for $999. Pioneer and Sharp will also launch a DVD recorder at this price in 2002. Last year prices were double at $1,999. Currently, the format war is enough of an incentive for manufacturers to lower prices to mainstream consumer levels. It is a race to the highest household penetration rate. However, if DVD recorder shipments are to ever reach the level of DVD player shipments, more manufacturers need to bring products to market.
The write-once format will be important to the DVD recorder market for consumers who want to use the recorder for simple video editing or those who archive their favorite TV shows. The media is also expected to be much less expensive than the rewritable media in any format. Write-once media will eventually approach the $1 mark. DVD recorders will be paired with hard disk drives for complete time shifting/recording solutions.
DVD player unit shipments will grow from 13 million in 2000 to 19 million in 2004. While shipment growth will enable revenue growth for a time, declining prices will have an effect on revenue. As for recorders, prices still have a long way to go before DVD recorders become mainstream consumer products. We expect shipments to pass the 5 million mark in 2005, if DVD recorders can be purchased for less than $500. At this point, DVD recorder shipments will start to impact shipments of DVD players. We expect a decline in DVD player shipments compared to 2004.