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High-Definition Discs Aim To Outshine DVDs
Tue May 6,10:28 AM ET

By Patrick Seitz

Even as consumers snap up digital video disc players and DVD movies, consumer electronics firms already are angling to create the next-generation optical disc.

The new formats under development would offer high-definition video. Today's DVDs look fine on all TV sets, including new digital and high-definition models, but the HD discs have sharper images and hold more content.


Publicly, consumer electronics executives say it's too soon to talk about a replacement for DVD products that are selling so well and only recently broke into the mainstream.


But analysts say hardware makers behind the scenes are eager to gain an edge in next-generation disc technology.


One reason is that low-cost producers, especially in China and South Korea (news - web sites), already have commoditized DVD gear, cutting profits for today's products. Also, consumer electronics makers want to get the royalties and licensing fees that come from having the winning standard for a new technology.


"That's why we see the standards (news - web sites) battle even before there is much consumer demand" for a new product, said Wolfgang Schlichting, an analyst with market research firm International Data Corp. "To some extent, technology advances faster than consumers' needs."


Blue Period Ahead?


There are two major HD video disc formats being developed. Both use blue lasers to read and record data. Blue lasers have a shorter wavelength than today's red-laser DVD players and recorders and thus can hold more data.


Consumer electronics companies are taking a different approach to selling blue-laser disc hardware. The first products on the market will be machines for recording high-definition television broadcasts. Prerecorded movies and other content on disc will come later.


By contrast, DVD started as a play-only format for packaged content. DVD recorders came a few years later.


Now, DVD recorder sales are taking off, even though there are several different formats and not all are fully compatible. But prices have fallen and consumers like the idea of saving their home movies on sturdy digital video discs.


As for the next generation, the two blue-laser disc formats jockeying for position are Blu-ray Disc and Advanced Optical Disc.


Blu-ray is backed by Hitachi Ltd., LG Electronics Inc., Panasonic parent Matsushita Electric Industrial Co., PioneerCorp., Philips ElectronicsNV, Samsung Electronics Co., Sharp Corp., Sony Corp (news - web sites). and Thomson SA. Blu-ray Disc technology allows for 27 gigabytes of storage on a single-sided 12-centimeter disc. Today's DVDs hold 4.7 GBs.


Sony introduced the first Blu-ray Disc recorder in Japan on April 10. It sells for $3,745. Blank discs cost $29 each. Sony has no plans to sell the product in the U.S., says Sony spokesman Mack Araki.


Advanced Optical Disc is supported by NEC Corp. and Toshiba Corp. It can store about 15 GBs of data on a disc. One advantage of the Advanced Optical Disc is that the discs can be made on the same gear that makes DVDs, whereas Blu-ray would require significant changes to production gear.


Tech standard battles are tough because they have to do with patents, politics and egos, says Marge Costello, editor and publisher of Consumer Electronics Online News.


Most analysts believe that next-generation optical disc devices will be "backward compatible." In other words, they'll be able to play all the popular disc formats, including CDs, DVDs and recordable DVDs.


But don't expect to see much HD disc hardware in U.S. stores soon.

For one thing, the number of U.S. homes with high-definition TV sets remains low. Consumers have been waiting for prices to drop on HDTV sets and for more high-definition programming to be available.

HD video disc recorders could be on the market in the U.S. next year, but their numbers will be "extremely small" and the products very expensive, Schlichting said. "Eventually there will be a transition, but it could take 10 years before the average consumer is ready or needs to go beyond DVD quality," he said.

Hollywood studios are in no rush to embrace HD because DVDs are hot sellers. The studios don't want to slow DVD sales, confuse consumers or add to today's copy protection issues.

But Sony could provide its own high-definition content for Blu-ray machines. It owns a movie studio, producing hit films like "Spider-Man," "Men in Black," "Charlie's Angels" and "Anger Management."

Also, Sony doesn't have a stake in any of the DVD recording formats, so it might want to push Blu-ray devices onto the market sooner than others, Costello says.

Waiting Until '05

The main stakeholders in the current DVD recording formats - Pioneer, Philips and Matsushita - would prefer that Blu-ray devices not come out until 2005, Costello says. "They don't want it to come out now," she said. "They're just making headway with the current definition DVD."

It will be two or three years before there are enough homes with HDTVs to make blue-laser recorders viable, says Andy Parsons, senior vice president at Pioneer's U.S. unit. Only about 600,000 U.S. homes have tuners for receiving HD content.

Besides, DVD recorders are just hitting their stride. "Recordable DVD is now at the proverbial hockey stick point, where we're starting to see sales take off in a very dramatic way," Parsons said.

Some industry officials expect to see high-definition red-laser DVD products on the market as an interim step. These products would offer incremental improvements over existing DVDs. MicrosoftCorp. is interested in playing in this area with its Windows Media Player technology.

Microsoft said on Thursday that it was working with Artisan Home Entertainment Inc. to produce a high-definition DVD of the action movie "Terminator 2: Judgment Day," for release June 3. It will offer nearly three and a half times the resolution of standard DVD video, but will only play in higher-end Windows XP (news - web sites)-based PCs.

DVD debuted in the U.S. in March 1997. More than 43 million of the 105 million U.S. homes now have DVD players. The DVD Entertainment Group estimates that at least 55 million homes will have DVD players by year's end.

The DVD format has a lot of growth left before a replacement technology is needed, Parsons says.

"We're all kind of conditioned to be looking for the next big thing every couple of years," he said. But, he says, that doesn't mean the public will be willing to buy it.