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SPECIAL REPORT: DVD Steals the Show At CES 2002

8 Jan, 2002 By: David Ward

In a milestone for the home video industry, DVD players will outsell VCR decks for the first time in 2002 -- 16.25 million to 14.45 million, the Consumer Electronics Association (CEA) said in releasing its annual consensus forecast on the first day of the Consumer Electronics Show.

Consumers bought just over 13 million DVD players in 2001, making DVD the fastest product in consumer electronics history to reach a 25 percent household penetration rate, the organization reported.

A prediction that digital television sets would reach $8 billion in revenues this year, as unit sales are expected to grow from 1.43 million last year to 2.25 million by the end of 2002, indicate the public is sold on digital entertainment.

Over all the consumer electronics industry is expected to rebound from a 2 percent decline in 2001 to grow 3 percent to $95.7 billion this year.

"Just several months ago, we were unsure what the fourth quarter would hold; however I am thrilled to report that sales of consumer electronics remain vibrant," CEA president and c.e.o. Gary Shapiro said in his keynote address at the show this morning. "In an environment of consumer concern about safety, our products are providing the communications and entertainment solutions the public demands."

While Shapiro touted the success of the show coming just months after the Sept. 11 attacks, the overall size of the convention appeared smaller.

Touting the arrival of the digital decade, Microsoft chairman Bill Gates sounded a familiar theme in a keynote address last night, emphasizing Microsoft's commitment to consumer electronics by introducing two new software platforms based on Windows XP. One platform, "Mira," will let consumers carry wireless flat-panel tablets around the home, giving them touch screen control of home features such as DVD playback and Web access.

Microsoft also announced four consumer electronics companies will build its Windows Media technologies into DVD players beginning next month, including Panasonic, whose machine will be able to playback DVD-R and CD-R with Windows Media and MP3 formats.

In far ranging speech, Gates touted the success of Microsoft's new Xbox console, claiming hardware sales of 1.5 million and a software-to-hardware ratio of 3 to 1. Some observers, however, have noted that many vendors would only sell the consoles bundled with at least two games, which no doubt ratcheted up software sales.

Gates introduced chief Xbox officer Robbie Bach, who announced the company will introduce online gameplay to the $299 system later this year. The Xbox launches are on track for Japan next month and in Europe in March, Bach said, adding that by the June end of the company's fiscal year, Microsoft expects to have sold between 4.5 and 6 million hardware units, "and that's in seven months from a standing start."

Online gameplay "is a key element in continuing to drive innovation in the video game space," Bach said. "Xbox is the only console designed to take advantage of online right out of the gate. We designed it into the box so it will be very easy for people to get started." Online play is also a key competitive strategy, as Sony's PS2 already has established online gaming communities.

On DVD hardware front, the downward spiral of DVD recorder prices dominated the news.

Philips said it was breaking the $1,000 barrier with its DVDR-985. The player, which supports DVD+RW format as well as reads DVD+R write once discs, will reach shelves in February or March at $999. But there were also rumors at the show that low-end manufacturer Apex may be driving the price of DVD recorders even further down with sub-$500 recorder by next Christmas. The Apex move would continue the mirroring the lifecycle of DVD players, which plummeted in price since their 1997 introduction to sub-$70 in some cases this past holiday.

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