After years of hype, CD-RW is finally ready to roll with departmental solutions. The big question: will the promise of DVD rob CD-RW of its market window?
When you think of optical storage, more often than not you think of a technology that has been, at best, a poor cousin to the traditional hard-disk drive. But that's changing. Thanks to seemingly endless demand for larger amounts of low-cost storage and new levels of product usefulness and versatility, optical technology is finally coming into its own.
Leading the surge in optical shipments are drives in various CD formats. Since the beginning of the decade shipments of read-only CD-ROM drives have jumped from fewer than 1 million to more than 66 million last year, representing well over 90 per cent of all optical-disc drives shipped.
At the same time, rapidly declining prices have helped ignite a market for recordable versions of the CD format. As low as 1.4 million in 1996, shipments of CD-R (recordable) and CD-RW (rewritable) drives are expected to reach almost 4 million by next year.
"This is very much a here-and-now technology," says Ken Weilerstein, an analyst with the Gartner Group. "It's a proven technology, the software support is there, and the hardware is there. There are multiple sources of drives and a couple of choices of media, and the cost of the media, at roughly $2 per disc, has basically reached a throw-away price."
Most important, says Weilerstein, is the sheer pervasiveness of CD-ROM technology today. "If you needed to send me a large file and I didn't want you to send it over the Internet, you wouldn't ask me if my system could read this format," he notes. "You'd just assume that it could because the technology is so widely supported. That advantage - the vast installed base - is something no single vendor can create."
Resellers can cash in on this growing market as more companies turn to CD-ROM solutions for departmental applications and archival storage. While the majority of CD-ROM drives go into desktop systems, multidrive subsystems and direct network-attached units for business applications are being sold in increasing numbers.
In 1997 more than 47,000 disc towers were shipped, while shipments of CD-format disc libraries or jukeboxes reached 456,000. Towers consist of a stack of drives in a single subsystem. Libraries have one or more drives, with robotics to retrieve and load discs.
Industry analysts expect shipments of CD-format disc towers and automated libraries to grow 15 to 20 per cent annually over the next couple of years. "Jukeboxes are pretty tough to put together," notes Chris Gray, senior director of the enterprise group at a US-based developer of connectivity products for sharing CD-ROM resources across a network. "The whole idea of attaching jukeboxes to a network and getting the different devices shared, titles mounted, and the files understood is a fairly daunting task and not something for the faint of heart."
DVD: friend or foe?
One source of customer confusion is the emergence of digital versatile disc (DVD) technology, the next generation of the CD. Promising a single, interchangeable medium for home-video and business applications, DVD holds 4.7GB per disc, seven times the capacity of CD-ROM.
Vendors began shipping the DVD-ROM drives in volume in 1997, and expectations for the new technology are high. But the emergence of two competing rewritable DVD formats threatens to put the entire DVD market on hold.
This bodes well for resellers that sell CD-RW solutions. Analysts and vendors now expect the uncertainty to push off the market's transition from CD to DVD technology. Most analysts expect shipments of CD-format drives to continue to climb through 1999 and don't expect DVD technology to catch up before 2000.
"If you're selling CD-RW products, you're probably happy that there are two DVD-rewritable formats out there," says Weilerstein. "At the very least it creates confusion in the market."
Cost slows proliferation
Other, perhaps more important, factors are likely to limit the impact that rewritable DVD technology has on CD-RW sales as well, observes Wolfgang Schlichting, an analyst with IDC. "The price of DVD is quite a bit higher, at least by a factor of two, than CD-RW and will probably stay there for some time," he notes. "And there's no installed base of readers, so if you create content, the potential for interchange is very limited."
"It's hard to overemphasise the impact of cost on how quickly a new technology is adopted," says Dana Berzin, US-based marketing manager with DVD-drive advocate Panasonic.
Like their larger-format optical cousins, CD towers and libraries are used most commonly in document-imaging solutions. The clear advantage for enterprise customers is the cost savings that in-house CD towers offer over outsourcing document imaging for pre-press and other solutions.
Some observers believe that the only thing holding back the market is customers' lack of familiarity with imaging and optical technology. Compared with the cost of administering and maintaining a large stockpile of paper records, digital document imaging represents an enormous saving, which can pay for the cost of a CD-jukebox within as little as two years.
While successful in departmental and workgroup environments, CD solutions are still a rarity at the enterprise level. Compared with other optical formats, CD's lower per-disc capacity means operators need to load more discs during recording sessions. In higher-end markets, 5.25in magneto-optical drives still dominate. While a CD offers 650MB, you can put 2.6GB on a magneto-optical drive, and now vendors are beginning to offer 5.2GB.
The advantage of the 5.25in format may be short-lived, however, once DVD closes the performance gap between CD and the magneto-optical drives. While the relative youth of DVD technology and the ongoing controversy over competing rewritable formats will likely extend the life of the CD-ROM market, the business still faces other challenges. One of the more difficult ones will be determining the impact of the Internet on CD-ROM and CD-RW demand.
In addition, manufacturers of hard disks and removable discs haven't been sitting still. While magnetic storage has traditionally trailed optical alternatives in cost per megabyte, recent enhancements in drive capacity now make magnetic storage increasingly competitive with CD-ROM solutions for archival storage.
What's the implication? It's difficult to tell, but over the long term, perhaps the best market for CD storage technology will remain its best application to date - serving as an inexpensive, high-capacity transport mechanism.
While vendors lay the foundation for the market's transition to DVD technology and, in particular, a rewritable format, an unexpected development promises to throw off even the most astute market planners.
Despite the DVD Forum's official endorsement of the DVD-RAM format as the rewritable replacement for DVD-ROM, last September three leading optical-drive vendors, Hewlett-Packard, Philips, and Sony announced a competing format called DVD+RW. The 3GB phase-change rewritable format promises to delay acceptance of any rewritable format, if not totally confuse buyers.
DVD+RW promoters promise better compatibility with DVD-ROM discs because the technology uses the same groove recording approach. In contrast, DVD-RAM discs are recorded on both land and groove tracks. Both technologies, however, require some alteration for a DVD-ROM drive to read rewritable discs.
Although DVD+RW technology has yet to hit the market - all three vendors promise to ship product by the end of the year - the renegade format has already had an impact on DVD-RAM developers.
In an effort to rebuild momentum behind the new format, the DVD Forum quickly announced a product-development road map that promises an accelerated track from first-generation 2.7GB products to a second-generation 4.7GB product within a year. A third-generation 15GB drive is planned for development four years later.
DVD-RAM proponents point out that DVD+RW supporters together represent approximately 75 per cent of the total CD-R drive market and therefore have a vested interest in delaying DVD-RAM deployment and extending the life of the CD-R and CD-RW markets.
"The way we read it, Sony and Philips - as the inventors of CD technology - collect a lot of money in royalty revenue from that technology, so it's in their interest to prolong the life of CD-ROM as long as possible," argues Panasonic's Berzin. "We haven't seen any product yet, and we don't know how serious they are about it, but all indications are that it's a stalling tactic to try to confuse the market."
DVD+RW vendors disagree. But what-ever the intentions, the impact on the competing format will probably be the same. Admits Bob Katzive, vice president and industry analyst at Disk/Trend: "Until you have a uniformity of format, either settled by agreement or imposed by one or the other just becoming overwhelmingly successful, it's going to be hard to get the OEMs to make commitments to either technology."