April 8, 2002 2:50 PM PDT

Apple reaps DVD fruits

update Apple Computer on Monday said it had shipped nearly half a million computers with DVD recording drives capable of making movies that consumers can play in home DVD players.

The Cupertino, Calif.-based company also said it had shipped more than 2 million DVD recording discs.

Manufacturers shipped more than 600,000 DVD recording drives last year, according to Gartner. Manufacturing sources put the number shipped by Pioneer Electronics, the manufacturer making Apple's drive, below 400,000.

"The majority of those Pioneer drives would have come from Apple," said Gartner analyst Mary Craig. "It appears that Apple has been very successful finally getting a recordable DVD that has a lot of appeal with consumers. They've had the greatest success with any of the formats."

But analysts expect Apple's early lead to vanish as PC manufacturers jump onto DVD recording. No. 1 PC maker Dell Computer and Hewlett-Packard, the leader in consumer computers, started shipping DVD recording systems late last year. Dell and HP also adopted a different format, DVD+R/RW. Apple, Compaq Computer, Sony and Packard Bell NEC in Europe use DVD-R/RW drives from Pioneer.

"Video is a place to start, but I think it will have more of the 'flash in the pan' impact," Craig said. "People are going to ask what they want to do with these drives, and that likely will be data storage." On that front, DVD+R/RW has the edge over DVD-R/RW, she said.

Apple does DVD
Apple is one of the early DVD recording leaders. The company started with DVD-RAM, which perhaps is the easiest of the DVD technologies to use for data but has severe compatibility problems with commercial DVD players. In January 2001, Apple switched to DVD-R/RW drives made by Pioneer, also introducing its free iDVD authoring software for consumers and the $999 DVD Studio Pro for the commercial market.

Apple now offers Pioneer's second-generation DVD-R/RW drive on one consumer and two professional Macs.

"We are leading the industry in terms of DVD burning," said Greg Joswiak, senior director of hardware product marketing for Apple. "Our solution offers the best consumer compatibility, the lowest price media, and also puts (DVD recording) in systems that make sense. We think that combination of things puts us miles ahead of what other prosumer products are trying to do."

In fact, Apple has been expanding its role in video and DVD production, particularly for the professional market. On Friday, the company released an important upgrade to its DVD Studio Pro production and authoring software and announced Cinema Tools, an add-on program for Final Cut Pro. Cinema Tools is expected to go on sale next month.

Apple also offers direct support for DVD-RAM and DVD-R right from its operating system. Mac OS X can author DVDs right from the file menu, a feature that is missing from Windows XP. But Mac OS X does not directly support DVD-RW, even though the Pioneer drives shipping on Macs can read or write to the discs. DVD-R discs can only be recorded once, while DVD-RW media can be reused. Apple apparently did not enable the rewritable feature in its software because of issues relating to how DVD-RW handles data.

This shortcoming with DVD-RW could be decisive in the future as DVD-R/RW competes with DVD+R/RW as the dominant standard. DVD+R/RW offers better handling of raw data than DVD-R/RW does, Craig said. In the long run, that could give the format the market edge, even though DVD-R/RW is the early leader.

"If consumers want to go with a drive for video they'll probably go with Pioneer, because of what Apple has done. They don't really focus on data storage," Craig said.

"I believe video appeals to the early adopter phase of the market," she added. "There are some people who will work all day at the computer and then go home and stay all night at the computer editing video. But that's a very small percentage of people."

As DVD recording expands beyond just authoring movies and into other data uses, Craig said DVD+R/RW will likely close the gap on DVD-R/RW. DVD+RW also benefits from the sheer volume of PCs Dell and HP ship. Also, Compaq is expected to drop DVD-R/RW drives sometime after HP completes its acquisition of the Houston-based computer company.

By the numbers
Manufacturers shipped 628,000 DVD recording drives last year, the majority from Pioneer, according to Gartner. Manufacturers are expected to ship about twice that number in 2002. While Pioneer is expected to lead again, DVD-R/RW drives will likely account for less than 50 percent of units, Gartner predicted.

The market researcher estimated the number of DVD recording drives shipped would swell to 3.9 million in 2003 and 14.3 million the following year. Manufacturers should ship 27.6 million and 55.7 million, respectively, in 2005 and 2006, according to Gartner.

But that pales in comparison to CD rewritable. Manufacturers shipped 45.6 million CD-RW drives last year and are expected to ship 53.8 million in 2002, according to Gartner. That number is expected to reach 115.1 million by 2006.

On the production front, manufacturers are churning out about 100,000 units each of DVD-R/RW and DVD+R/RW drives a month, industry sources said.

Media cost is the major factor affecting consumer DVD recording adoption right now. Pioneer last month cut the price of blank DVD-R discs to $6 from $10 and DVD-RW discs to $10 from $20. Apple already had been selling DVD-R discs for $5 each in packs of five.

"Low media price is something we tried to drive from the beginning," Joswiak said. ?We have been pushing and pushing because we know in the end that's the secret of success of any standard catching on. It was the same with CD-Rs as well."

But DVD+R/RW media makers responded quickly. HP-branded DVD+RW discs sell for around $10, but for as little as $8 from other manufacturers. DVD+R discs, which are expected to be available this month, will sell for an estimated $6 each.

Craig said that the DVD-R/RW disc's early price advantage was "a big one," but DVD+R/RW has quickly caught up. "I think it's only a matter of time before the media price wars start," she said.

DVD+RW's biggest problem may be angry customers who bought first-generation drives. Those drives, such as HP's dvd100i, are only capable of using DVD rewritable discs and cannot be upgraded to use DVD+R media. A number of customers have cried foul, arguing that some manufacturers had assured them the drives would later support DVD+R.

For some customers, compatibility problems with commercial DVD players and higher disc costs make DVD+RW less attractive than also having the option of producing more compatible and lower-cost DVD+R. Newer HP drives support both DVD+R and +RW.

For the time being, the DVD-R/RW drives used by Apple offer better compatibility with the majority of consumer players now in most homes. Craig estimates that DVD movie discs produced using Pioneer's drive are compatible with more than 90 percent of consumer DVD players. DVD+RW is much lower, closer to 60 percent, although DVD+R compatibility is expected to be much higher.

 

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