DVD: A Simple, Elegant Idea

It is difficult to comprehend how much, in only six years, the invention of the DVD has changed consumer television technology.
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In the early 1990s, the Media Lab at the Massachusetts Institute of Technology was knee-deep in research on digital television. The lab's wildly brilliant professors and students put television technology under a microscope and frequently questioned -- in a highly public manner -- the status quo of a very conservative industry.

America's broadcasters hated it.

I can't count the number of times after witnessing a compelling demo at the Media Lab that a broadcasting executive would pull me aside and warn that the lab's founder, Nicholas Negroponte, was a "loose cannon" whose radical ideas were beyond reality. The lab, I was told, was full of academics who just didn't understand the real world of the broadcasting business.

A day I'll never forget was my first interview with Andy Lippman, an early digital television guru and now senior research scientist at the lab. I sat in his office on a swivel chair, holding a tape recorder, as he circled the room giving me a rapid-fire introductory lecture in Digital TV 101. I got dizzy as I swirled in a continuous circle, trying to keep up with his frenetic pace.

THE 'PAPERBACK MOVIE'

It took months to absorb what he told me in that single day, but the memento he gave me stands as a blunt reminder of how the DTV transition is actually playing out. As I left, he tossed my way a 3M digital data compact disc with the following label: "Paperback Movies 1, Electronic Publishing Group, MIT Media Lab."

It's what we call a "paperback movie." Hang on to it, he suggested. The confused look on my face demanded further explanation.

"The whole idea of paperback movies is that you distribute the movie on a medium so inexpensive that you fundamentally only sell the license to view it," Lippman explained. "Like a paperback book, it's so cheap you would never go to the trouble or the expense of copying it."

The movie on the disc is protected with encryption. "The advantage of encryption is it allows you not to care what happens to the disc," he continued. "It can be a giveaway."

Of course, what I was given that day was an early prototype of a DVD, a technology that would become not only the most successful commercial deployment of digital television, but the most popular consumer electronics product launch in history.

EVERYMAN'S DIGITAL TV

While broadcasters still struggle to make something of digital television, Andy Lippman and Nicholas Negroponte have moved on to work on the technologies of the next 20 years. Looking back, we can thank those "loose cannons" for what is a simple, elegant idea-a kind of everyman's digital television that caught the imagination of the masses.

It is difficult to comprehend how much, in only six years, the invention of the DVD has changed consumer television technology. More than 17 million DVD players were sold in 2002 alone, the most units ever since its introduction to the market in 1997. Shipments of stand -- alone DVD players in 2003 now total nearly 9 million units -- an increase of 21 percent over 2002. The Consumer Electronics Association (CEA), the group that tracks the numbers, reports that sales continue to soar each month.

The latest sales figures suggest that DVD is now having a major effect on TV set configurations. During July, factory-to-dealer sales of TV/DVD combinations increased by 84 percent to nearly 97,000 units. Stand-alone DVD player sales reached nearly a million units for the month.

Another significant DVD fact is that more than two out of five (42 percent) home computer owners now have DVD drives. One in 10 of these have the capability to write DVDs. Interestingly, the CEA has found that consumers are showing widespread acceptance of DVD writer technology. This number is expected to climb rapidly as DVD prices continue to decline and more users discover they can make digital video productions of high technical quality with bundled software and inexpensive camcorders.

HOME VIDEO MARKET

DVD is also having a huge impact on the home video market. The New York Times reported this summer that home video sales accounted for more than 58 percent of Hollywood's income last year, more than twice as much as box-office revenues. Sales of DVDs to consumers are the biggest, most profitable and fastest-growing component of that revenue.

DVD sales and rentals are "becoming, in a lot of ways, the primary market in determining whether to 'green light' a movie or not," Chris McGurk, vice chairman of Metro -- Goldwyn -- Mayer Inc., told the Times.

Selling, rather than renting, DVDs is the most profitable scenario for content creators. A studio may net about a $12 profit from the $20 price of a DVD. However, motion picture studios make about $5 on the sale of a $10 theater ticket and may make only pennies from a video rental.

DVD technology offers a major new direct-to-home conduit around cable, satellite and broadcast outlets. New methods of distribution are rapidly emerging. Independent filmmakers are now finding national distribution in subscription DVD movie clubs, television producers are able to generate income from series by packaging them in box sets for direct sale, and small -- scale niche video producers can distribute DVDs on -- demand through new duplication methods that emulate print-on-demand publishing.

"Paperback TV"-a simple, elegant, low-cost way to distribute digital television without a huge investment and complex delivery infrastructure. Gosh, those crazy academics might have been right after all!