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Hard disks boost DVD recorder growth

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Computing and Information Technology
TiVo Incorporated

TOKYO, Japan (Reuters) -- Digital video disc (DVD) recorders armed with hard disk drives are at the heart of a digital electronics boom sweeping Japan and, if consumers can overlook their hefty price tags, they may soon replace the 50 million VCRs a year being sold globally.

"It really is convenient: I record shows on to the hard drive and erase them later or copy the stuff I want to keep on to DVDs," said Daisuke Kouno, a 25-year old car mechanic and owner of a Pioneer Corp DVD recorder with an 80-gigabyte hard drive.

Nomura Securities estimates the global DVD recorder market will reach 500 billion yen ($4.6 billion) this year, while Pioneer estimates global demand to more than double next year to 8.24 million units from a forecast for 3.6 million units this year.

Market leader Matsushita Electric Industrial Co Ltd, maker of the Panasonic brand, Pioneer and Toshiba Corp gained an early advantage, but competitors at home and abroad are aggressively trying to close the gap with new products.

Latecomer Sony Corp aims to make a splash with this weekend's launch of "PSX," an entertainment system that includes a DVD recorder with a hard disk drive plus a PlayStation 2 game machine and satellite TV tuner.

"Just looking at reservations for the PSX, we have so much demand that we can barely handle it all," Sony president Kunitake Ando told Reuters in an interview last week. "We have no concerns about its sales."

Electronics retailer BicCamera said it would open some of its stores an hour early on Saturday to handle PSX sales.

Sony's DVD recorder market share has jumped to 20 percent from almost nothing since it began selling in November a new line-up called "sugoroku," roughly translated as "great recording," Ando said.

DVD/HDD recorders sell for anywhere between 60,000 yen ($550) for one with an 80-gigabyte hard drive to 130,000 yen for one with a 250-gigabyte hard drive. Pioneer estimated last month DVD recorder prices would fall about five to 10 percent per year.

A PSX with a 160-gigabyte HDD will sell for 79,800 yen and be able to record up to 204 hours of television. Sony will also sell a 250-gigabyte version, capable of recording up to 325 hours, for 99,800 yen.

Moving overseas

Japan accounts for nearly 60 percent of the world's DVD recorder demand, but electronics manufacturers expect the majority of sales in 2004 to come from North America and Europe.

In the United States, the world's biggest electronics market, most DVD recorder models come without a hard disk drive.

Gateway Inc rolled out a $349 DVD recorder in November, joining Philips, Thomson, and Samsung Electronics to offer a basic DVD recorder in the U.S.

"DVD recorders are not selling so great in the United States. Obviously, price is one issue," said Noboru Kawaguchi, Pioneer's manager for DVD product planning.

Another factor has been the popularity of TiVo, a VCR-sized black box that attaches to the back of a TV and stores programs onto a hard drive, which comes in 40-hour and 80-hour versions.

TiVo Inc has over a million subscribers, who can program the set-top box to seek out and record a particular shows or a full season of episodes. It can also save shows based on viewing patterns.

Pioneer is the only manufacturer to offer a DVD recorder compatible with TiVo, so heavy users can save their favorite programmes onto DVDs.

Tokyo-based Pioneer offers two TiVo-compatible DVD recorders, an 80 GB version for $1,000 and a 120 GB version for $1,500.

Those lofty prices stand as an obstacle to the growth of DVD recorders, but if history repeats itself prices of DVD recorders will fall sharply in the next few years.

In six years, DVD players have grown to 60 million units worldwide, but an influx of cut rate models from Chinese and South Korean manufacturers forced out less efficient Japanese companies as profit margins turned razor-thin.

"DVD recorders will also become commoditized in about five years, which means Japanese manufacturers must get as much as they can for the next few years," said one industry analyst.

Compatibility hurdle

Another major obstacle for the DVD recorder industry is disagreement over a recording standard. There are three main recordable formats: DVD-RAM, DVD+RW, DVD-RW.

Matsushita backs the DVD-RAM standard. It can be written, erased and rewritten 100,000 times, but it is not as widely compatible as DVD-RW.

Pioneer backs the competing DVD-RW standard, which is compatible with almost everything, including personal computers and Sony's PS2, but sceptics say the recording is slower than DVD-RAM and DVD+RW.

DVD+RW boasts better performance, but Sony's new PSX will not record or play discs in that format.

Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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