First came the floppy disk. Born as a 5.25″”, the size of the venerable floppy quickly shrank to 3.5″”, even as its capacity quadrupled. However, as applications and data grew, a single floppy was no longer enough for our removable storage requirements. Along came the CD-ROM, which gave users an unprecedented

650MB of storage space.

But applications continued to grow, and our appetite for storage grew along with them. The advent of music sharing fueled the growth of CD writers. As the old adage states, what comes around goes around, and again we are running out of room. What’s next for optical drives?

First let us consider the lowly CD-ROM drive. These drives are inexpensive and provide access to the most ubiquitous optical technology. Although sales are declining, there is still lots of life left in this technology. CD-ROMs will continue to be installed on new PCs for at least another two years.

The fall in CD-ROM sales can be attributed to the increase in usage of CD-RW drives. Users have fallen in love with optical writing. The music-swapping craze fuelled the growth of these devices. New uses, such as hard drive backup and photo archiving have been found. With prices dropping continually, this market shows no sign of slowing down. CD-RW sales are expected to continue to be very strong over the next year, with more drives sold as original equipment on new PCs.

The million-dollar question in the optical drive market is when will the switch to DVD technology happen? With a seven-times greater capacity, DVD is the logical upgrade for computer users. Indeed, DVD movie players have had astoundingly fast adoption in the home entertainment market.

This home entertainment adoption has not translated into growth in the PC market. Two inter-related factors have kept adoption low. Software developers have not released titles on DVD, even though many software packages require multiple CDs. They continue to release on CDs because there is not a large enough installed base of DVD-ROM drives. For their part, users have not upgraded to DVD because of a lack of applications. It is a classic Catch-22.

The answer for DVD will likely be the development of home-grown applications. Just as music sharing jump-started the CD-RW market, video editing could be the critical application that drives users to upgrade to DVD. Many vendors have positioned their offerings to promote video editing. However, editing home movies requires a DVD drive with write capability. This is not good news for DVD-ROM.

DVD writers may leapfrog DVD-ROM drives entirely. Users have become enamoured with optical writing through CD-RWs. They are unlikely to give this feature up with DVD.

Hamstringing DVD writer adoption is the lack of a single uniform standard. As yet, no clear winner has emerged in the standards war. However, multi-standard drives are being released. This convergence will only benefit the market.

Besides the lack of standards, the cost of the drives and the cost of media are significant. Most DVD writers retail for between $500 and $899. This is significantly higher than the $129 to $199 for CD writers. In addition, CD media are available for less than $1 each. DVD writable disks cost upwards of $10 each. Obviously demand will be stimulated as prices drop for drives and media.

Jennifer Ewen is a senior market analyst for Evans Research Corporation of Toronto. Ewen can be reached at jewen@evansresearch.com.

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