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CE Show to Shift Focus to Recordable DVD Players, High-End Television

4 Jan, 2003 By: David Ward

After several years in the spotlight, traditional DVD playback devices are likely to take a back seat at the Consumer Electronics Show (CES) in Las Vegas Jan. 9 to 12, as the industry focus shifts to new recordable formats as well as flat-panel, High Definition (HD) and other high-end TV displays.

In many ways, DVD's meteoric rise over the past five years is attributable at least partially to the consumer electronics industry's ability to drive down the cost of entry-level players. But it's doubtful this year's CES will see any new DVD player price breakthroughs because devices simply can't get much lower than the sub-$40 many retailers offered in the days after Thanksgiving. Instead, Richard Doherty, CEO and director of market research for The Envisioneering Group, said, “What we're looking for at this year's show is a fall in the price of portable players.”

Doherty said he expects to see price barriers broken in other categories as well, ranging from sub-$1,000 HD TV sets to sub-$400 recordable-DVD players.

“You may see PVRs [personal video recorders such as TiVo] getting challenged by disc-based DVD recorders with a lot of PVR functionality. For a lot of people, DVDs that can store up to six hours on a side is sort of a poor man's PVR,” Doherty said.

That theme was echoed by Robert Greenberg, VP of brand marketing at Panasonic, who said, “We expect 2003 to become the breakout year for recordable DVD, with demand fueled especially by consumers who want to back up their videotaped memories on the more durable DVD discs.”

Despite price erosion in virtually every category, CES finds the consumer electronics industry in surprisingly strong shape.

“Compared to almost any other industry … it has done remarkably well,” Doherty said. “During this economy, people have decided to take their entertainment dollars that used to be spent on a Broadway show or a vacation and use them to expand their home theater or buy more discs for their movie library.”

Hardware and content can jointly share the credit for the rise in home entertainment, but the software side of the business, including DVD/VHS, is largely unseen at every CES. That will likely be true this year as well, noted former Columbia TriStar Home Entertainment EVP Paul Culberg, who quickly added that even if they're not in attendance, studio executives and video retailers need to be aware of what's going on at the show.

Culberg, who runs his own consulting business, Lobo Creek Advisory, said, “Until HD-DVD standards are there, until video-on-demand has proper digital rights management and until all the issues surrounding the next generation of delivery are settled, there's very little the software guys can do. But they still need to understand digital rights management [DRM] and the fact that there are going to be some changing economics. They should also be aware of the pitfalls that came about in the audio business in terms of DRM and electronic delivery, and ... they should be looking at ways that traditional retail can be a part of the new mix.”

While CES hasn't been much of a show for hard issues, one of the themes this year will be copyright protection. Two CES keynote speakers -- Sony president and COO Kunitake Ando and Intel CEO Craig Barrett -- are expected to address the issue during their speeches.

“A lot of people in the high-tech industry are tired of being made the scapegoat for all piracy problems and resent the fact that many people joke that PC really stands for ‘Perfect Copy,’ Doherty said. “For movies, PCs are really a secondary distribution, and a lot of problems are caused initially by consumer electronics products such as people bringing camcorders into theaters.”

Sony's Ando told the Los Angeles Times last month he expects the hardware, PC and content industries to iron things out.

“I'm rather optimistic, because both industries need each other,” Ando said. “Right now, of course, there are sometimes heated discussions … but I think both industries will find a comfortable manner, so I'm not so worried.”

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