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Hardware for the Holidays

18 Sep, 2003 By: Erik Gruenwedel

Spurred by a 21 percent increase in year-to-date sales of DVD players since last year, some industry experts are suggesting that set-top DVD recorders will emerge as one of the retail stars for the fourth quarter.

Stand-alone DVD recorders record and edit digital video from VHS devices and TV. Most recorders accept the usual recording formats, including DVD-R (record once), DVD-RW (multiple record and write), DVD+R and DVD+RW (alternative record and write formats), and DVD-RAM, which only plays on a RAM-compatible player.

Manufacturers selling DVD recorders include Panasonic, Philips, Pioneer, Samsung, Toshiba, Apex, Sony and TDK, among others.

Experts say fourth quarter and holiday pressures will significantly drop DVD recorder prices below $500 for the first time.

“I'm expecting price to be pushed down closer to $350, maybe even $300 by the holidays,” said Sean Wargo, director of industry analysis for the Consumer Electronics Association (CEA). “With a lot of manufacturers starting to pay attention to the DVD recorder market you are going to see aggressive pricing.”

No Stopping DVD Players
While interest for DVD recorders among retailers and manufacturers is rising, sales of DVD players continue to outperform analyst projections. More than 8.8 million DVD players were sold through July 2003, compared to 7.3 million units during the same period last year, according to the CEA. “It's not up where the VCR was at its peak [of 98 percent household penetration], but it's certainly mainstream,” Wargo said.

He added that a big obstacle to replicating the VHS market penetration involves educating select consumers who don't understand DVD and don't want to make the switch because of the added expense.

He said regardless of whether the DVD player duplicates the success of the VCR, market penetration will occur in half the time. “It took DVD players about five years to reach 20 percent penetration; it took VHS 10 years,” he said.

DVD Recorders Slow Out of Gate
While DVD player sales continue to impress, to date less than 100,000 set-top DVD recorders have been sold, according to industry sources.

A CEA spokesperson said the organization doesn't track unit sales of DVD recorders due to a myriad of reasons, most notably a lack of critical mass of units shipped.

“Bottom line, it's not enough to make those guys excited,” said one manufacturer.

The NPD Group, a Port Washington, N.Y.-based research company, says about 80,000 DVD recorders were sold through July, representing 6 percent of home DVD deck sales (players and recorders) and generating $45 million in revenue due to higher SRPs.

The higher margins should bode well for merchants. “The profitability for retailers of DVD recorders is in dollars more so than units,” said Tom Edwards, senior industry analyst with The NPD Group.

Resilient DVD Burner Market
As the DVD recorder market evolves, internal DVD burners, the largely unheralded precursor to set-top recorders, thrive.

PC manufacturers routinely bundle DVD burners into their product to maintain higher prices on the retail side, according to Edwards.

Experts add that the lure of editing videos and slide shows with added features such as menus, music, navigation screens, transitions and special effects helps drive burner (and PC) sales.

The total number of installed burners in PCs is expected to reach 15 million by the end of the year, according to industry sources.

Sony's Dual RW DVD burner this month emerged as the top internal drive, with 39 percent of sales in retail and reseller markets, according to The NPD Group.

Not to be outdone, Pioneer Electronics announced that it would ship its 5 millionth DVD-R/DVD-RW drive later this month.

Thus far, attempts by manufacturers to replicate value-added editing features to DVD recorders remain a work-in-progress.

“I know manufacturers are trying to make the DVD recorder remote control device more useful for editing but it's not there yet,” said Kathleen Maher, VP and senior analyst for Jon Peddie Research in Tiburon, Calif.

The NPD Group's Edwards believes the lure of DVD movies via a PC has waned. “Very few people are going to buy a video game player or PC so they can watch DVD movies,” said Edwards. “That's not the medium for it.”

Importing TiVo
In an attempt to separate its DVD recorders from the pack, Pioneer next month will debut two high-end DVD recorders that feature TiVo, the San Jose, Calif.-based digital video recording service.

The alliance will give consumers the ability to transfer, and not just store, TV content from TiVo's hard drive onto a DVD. Up to now, content on TiVo could not be downloaded. “It's going to attract early adopters who have been waiting to own a TiVo device,” said Pioneer spokesperson Aaron Levine.

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