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BusinessWeek: January 11, 1993 |
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Top of the News
SO YOU THOUGHT YOU HAD EVERYTHING It's happening again: Just when you finally replaced all your vinyl LPs with shimmering, silver compact disks, consumer-electronics makers want you to start replacing your cassettes, too, with higher-fi digital tapes. And it's time to put old snapshots onto Photo CDs and show them on a TV screen. Books? Buy your next encyclopedia on CD-ROM, adding sound and motion-picture clips to the boring old text. And remember that 16-bit video-game machine you got the kids a year ag, because they were tired of the 8-bit one? Now, you can attacha CD for movie-like realism--for amere $300. Driving this onrush of new products is the $140 billion consumer-electronics industry's need to reinvent itself. With a stagnant global economy and cutthroat competition, profits are way off: down 60% at Sony Corp. and 79% at Matsushita Electric Industrial Co. in the fiscal first half, and down 80% at Philips in the nine months ended Sept. 30. Says Matsushita Director Masahiko Hirata: "The industry desperately needs a new hit." That hit product, whenever it comes, almost certainly will run on ones and zeros: The digital language of computers, which appeared a decade ago in compact-disk players, is showing up in everything from new music machines to the coming high-definition televisions. Digitizing the "analog" wave forms of sound and pictures into ones and zeros makes possible all kinds of manipulations, from blending text and video to drastically compressing signals (diagrams). Some of the new digital gear made it to market in time for the holidays. Even more items will appear at the industry's giant Consumer Electronics Show in Las Vegas in early January. For a glimpse at what product developers have in mind, consider the latest spin-off from defense research: It's a $2,500 box, due out this spring, that digitally corrects for the distortions and blind spots created by reflections of music from the floor, walls, and ceilings. The technology, which grew out of work on "stealth" radar-evasion systems, is from MusicSoft Inc., a joint venture of two high-end American audio companies: speaker maker Snell Acoustics Inc. and hardware manufacturer Audio Alchemy Inc. The system, which will be introduced by Snell as the CQ-10, generates sound waves that are timed precisely to cancel unwanted echoes. In the early version, buyers will have to pay a sound technician to install correction software, which is customized for the room where the speakers are. The long-term vision is to make the musical output from a CD or digital cassette as easy to manipulate as a document in a word-processing program, with software available for every specialized purpose. Want surround-sound? It might come as a $35 cartridge that would plug into a general-purpose digital signal processor for audio. Sales of such devices won't add up to much for several years. For immediate profits, consumer-electronics companies are putting more faith in compact disks, which aren't just for music anymore. Two hopefuls are Philips' Compact Disc-Interactive, or CD-I, and Tandy Corp.'s Video Information System. Both are $700 machines that show pictures and limited video clips. Program developers have come up with about 100 interactive video titles, such as enhanced books, educational programs, and video games. Eastman Kodak Co., meanwhile, is pushing Photo CD. For $20 or $25, photo buffs can get rolls of snapshots digitized and scanned onto a CD. Then, with Kodak's $450 player, they can show them on the TV screen, using a remote control to enlarge images, crop them, or reorder them into a slide show. CDs are catching on in the video-game world, too. Two months ago, Japanese maker Sega Enterprises Ltd. introduced a $300 CD accessory for its $99 Genesis game player to give games a more movie-like realism. "Adults haven't related to video games, which by and large are agility games," says Douglas E. Glen, group marketing director at Sega of America Inc. "They'll be drawn in by the movie aspect." Sega sold 100,000 copies of its CD player in the first month alone, more than the combined sales to date of all other consumer CD-ROM players. Nintendo Co. will follow with a similar option later this year, and the advent of CD-ROM technology is luring new entrants to video games. These include Sony and startup 3DO Co., which was scheduled to introduce on Jan. 7 an unusually sophisticated game machine targeted to adult players (box, page 38). The new CD-ROM formats have a lot going for them: CDs are familiar and unthreatening to consumers, yet they have the enormous storage capacity needed for multimedia devices. "The industry has been looking for a blockbuster, and I think CD-ROM could be it," says Eugene G. Glazer, consumer analyst at Dean Witter Reynolds Inc. The reason? Unlike new digital music formats, which cannibalize their predecessors, CD-ROMs create a new consumer category, much as videocassette recorders did. In the 16 years since the first home VCR was introduced, sales of VCRs and camcorders have brought their Japanese makers perhaps $200 billion in business. BEWILDERED. The danger, as Glazer notes, is that with so many new and incompatible products coming out, consumers may get confused and buy nothing. In the music field, that's a worry for Sony and Philips, which in the past two months have released rival digital technologies for replacing cassette tapes. Both newcomers combine recordability with sound quality that's about the same as CD. Sony's Mini Disc borrows magneto-optic technology used for computer data storage to erase and record music on its 2 1/2-inch-wide disk. Sony has overcome the skipping that plagues car and portable CD players by sending bursts of music into a memory buffer that never completely drains. So even if the laser is knocked completely off-track, the listener will never know. By contrast, Philips' Digital Compact Cassette looks much like a conventional analog cassette. In fact, the player will also play the vast library of existing analog tapes. But pop in a digital cassette, and hisses and distortions disappear. Even if they aren't confused, consumers may still be put off by the price of the new technologies. Philips' Digital Compact Cassette deck lists at $700, and Matsushita's version, under its Technics brand, is $1,000. Sony is aiming at the Walkman portable market, which it dominates, with versions at a pricey $550 and $750. At this month's show, dealers are seeing cheaper variations of both systems from a number of Japanese competitors, including Aiwa, Denon, Sharp, and Sanyo. By spring, they'll be on the shelves for less than $500. It's too early to tell whether consumers are crying out for a new way to play and record music--any more than they're desperate, say, to display snapshots of last summer's vacation on their TV. For record labels, the good news is that, once consumers do buy new players, they'll probably splurge on music to play on them. Such as that fourth version of the Beatles' White Album. | |
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