VIDEODISC RIVALS SETTLE ON FORMAT

In a compromise that clears the way for the biggest revenue stream for copyright holders since the videocassette boom of the ’80s, Sony Corp. and Philips Electronics N.V. have agreed to combine technology with rivals Toshiba and Time Warner to produce the digital videodisc in a single format.

“This new high-density CD format will address all consumer and industry needs for a single music, game, motion picture and multimedia platform,” Sony president and CEO Michael P. Schulhof said in a statement issued Sept. 15.

The DVD is a compact disc the size of current audio CDs capable of holding full-length movies with multichannel sound. The DVD – which for now is being called by all sides the “high-density disc” – is expected to become the next generation of homevideo and CD-ROM product, with rollout to consumers planned for late next year, or early 1997.

“It is a victory for the consumer,” Philips exec VP Henk Bott said in announcing that its proposed compromise had been accepted by the Time Warner/Toshiba-led alliance of Hollywood studios and computer companies that included Matsushita Electronics.

“The new standard exemplifies how corporations around the world can cooperate for consumer benefit,” said Warner Home Video prexy Warren Lieberfarb.

Retailers also gave the move a thumbs up, adding that while DVD is not expected to immediately cannibalize sales of homevideos, it will likely have a more immediate impact on the sales of laserdiscs.

Homevid industry observers note that the studios will be the biggest winners from the decision, as they now have a new format on which to place their library titles.

“But it’s far short of a slam dunk,” observes Jeffrey Eves, president of the Video Software Dealers Assn. “The consumer has yet to signal their acceptance of DVD.” Eves noted that the durability of the disc will play a role in the rental marketplace and some retailers may be reluctant to stock new products.

The DVD has been under development since the mid-1980s. But January’s announcement by Sony and Philips that they would pursue a format incompatible with one being developed by Time Warner and Toshiba raised the possibility of a format war similar to the VHS-Beta joust of the early ’80s that slowed consumer acceptance of the videocassette.

The hand-shake agreement over the DVD, described as “solid” by Bott, came only after months of intense international corporate diplomacy.

The majority of Hollywood studios had lined up on the side of Toshiba and Time Warner, but without the support of key entertainment players like Disney and computer industry heavyweights like Microsoft, neither side was able to prevail.

Input from Hollywood and the computer industry was credited by insiders as being instrumental in bringing the warring sides to the table.

The essential compromise, according to one engineer close to the process, “mixes Toshiba’s disc physics with Sony-Philips’ signal processing.” That means the new discs, in several combinations for either computer or homevideo use, will combine Toshiba’s basic design for the disc with Sony-Philips’ technology for reading and transmitting the data encoded on the disc.

Each of the major studios has identified feature films that will now be rushed into the encoding process necessary to digitally compress movies into disc form.

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