INDIAN WELLS, CALIF. — Optical-media replicators remain optimistic about the future of digital versatile discs but face market challenges with the compact disc and DVD-audio formats.
Five executives discussed industry issues including DVD overcapacity on a panel during the International Recording Media Association forum, held March 21-25 in Indian Wells.
Panasonic Disc Services Corp. of Torrance, Calif., has seen increased DVD demand this year, said Alan Hamersley, general manager of PDSC worldwide mastering services.
"Order run lines are definitely increasing substantially," he added. "I liken this to the early days of CD manufacturing, where there were these periodic dramatic swings in supply and demand curves."
Pierre Loubet, vice president of CD-ROM and DVD in North America with Warner Advanced Media Operations in Glendale, Calif., wondered whether markets beyond video will embrace DVD.
"Is DVD going to be the carrier of the future as it was designed to be for music, games, video [and] ROM?" Loubet asked. "The market hasn't evolved the way it was supposed to, [but] the business is going to grow and stay healthy."
Strong merchandizing will increase disc sales, which in turn will boost hardware sales, he said.
Robert Hurley, senior vice president of sales and marketing with Sony Disc Manufacturing in Nashua, N.H., noted the CD-audio format is flattening, CD-ROM is declining in the face of broadband downloading, and Internet service providers are giving away fewer CDs.
"But we are very bullish on DVD," said Hurley. "It is a very narrow market now, but it is expanding dramatically" with upcoming software for PlayStation, Xbox and Nintendo games.
For the videotape market, Sony created 72 VHS stock-keeping-unit packages of the movie "Stuart Little" for separate retail uses.
"We have to continually get small in the eyes of our customers," Hurley said. "I think that is a trend that is going to continue."
Lower product pricing and higher client demands are squeezing the CD industry, according to Sean Smith, vice president of sales and marketing for CD audio, CD-ROM and DVD at JVC Disc America Inc. in Los Angeles.
"All aspects of the business have gotten so aggressive and so competitive" that margins virtually have disappeared, Smith said. "It is not healthy for us as a group, and it is definitely not healthy for clients, because eventually the services will suffer."
New entrants have undercut pricing.
"Warner is actively authoring, compressing, replicating and distributing DVD audio" at 10-15 titles per month, Loubet said.
Morris Ballen, chairman of Disc Makers/Audio & Video Labs Inc. in Pennsauken, N.J., suspects DVD-audio may fail.
"Consumers have embraced MP3, which is actually a somewhat lower-quality format [of digital audio] than regular CD, [and] consumers are looking for lower pricing on CDs," Ballen said.