Signals: Your Second-Worst Nightmare (Jan. 1994)

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Imagine for a moment that you are the chairman of an international audio corporation. Your hardware di vision is renowned for its innovative equipment, always six months ahead of the competition with products that span the market’s breadth. Your software division owns a massive archive of recorded music and continues to produce new recordings at a ferocious rate. Your music releases bring in tens of millions in profits and fuel sales of your hardware. The whole thing fits together like a fist in a kid-leather glove. You lean back in your chair, hands clasped behind your head.

Of course, the power that feeds you, technological evolution, must be care fully controlled. It would be too easy to leapfrog your own inventions, making formats obsolete before they’ve had time to mature. That would only make consumers angry, and there’s no profit in it, either. But, as you survey the current state of affairs, it is clear that a change is needed. Sales of analog cassettes are declining rapidly. What can replace them?

One possibility is a digital tape for mat, a logical replacement; to ease the transition, it could be designed to play existing analog cassettes as well as new digital cassettes. The other possibility is a recordable optical-disc for mat that is small and portable. Either way, you’ll profit from a new stream of hardware sales and, most important, recorded-music sales. You put your feet up on your desk. Life is good.

Still, one thing troubles you: It’s that pesky write-once recordable-CD (CD-R) technology, which lets people make non-erasable recordings they can play back on any conventional CD player. Those green-and-gold CD-R discs are appearing more and more frequently. The CD-R format was originally designed (and marginally tolerated) as a professional tool; the price of $20,000 for hardware and $75 apiece for blank discs guaranteed that it would never threaten the con sumer market. Then the prices started falling. Now the street price of professional CD-R recorders is under $4,000, and blank discs are going for $19, with no sign that the price plum- met is about to end.

That could be a major problem. Whereas new incompatible formats provide profits from both hardware and prerecorded software, the CD-R format can yield only hardware profits. Even worse, availability of a CD recorder might damage conventional CD sales as people buy blank discs and make their own CD’s. Sure, there’s tons of money to be made by selling blank discs, but your company is not a major player in that market. You get some comfort from your fore sight in helping to push legislation placing a consumer tariff on all sales of digital recording hardware and blank media, but it’s comfort the shareholders won’t much like. Well, you smile to yourself, the 1989 Athens agreement will keep every body in line; all the hardware and software companies (in your case, it’s the same company, heh heh) agreed not to spoil the status quo. No one wants to get burned on CD-R.

Then you pick up the paper and gasp in horror. Your second-worst night mare has come true. At a press conference in Tokyo, a group of Japanese hardware and blank-media companies announced plans to launch consumer CD-R recorders and discs. Their position is that CD-R will “expand the audio market” so that “consumers can have a wider choice of digital recording media.” The bastards!

You read on. They are not sure when they will launch, or at what price, or whether they will export from Japan. But another source says that the first consumer CD recorders could go on sale almost immediately, initially priced around $5,000, later falling to less than $1,000. A cold sweat breaks out on your forehead. The recorders will include the Serial Copy Management System (SCMS), which limits direct-digital dubbing to first-generation copies, but (your heart sinks) that also means they will allow direct digital copying from conventional CD players. Moreover, once recorded, the CD-R discs can be played in any CD player.

There’s more. The Recording Industry Association of Japan has at tacked the announcement—saying it violates the Athens agreement—yes! Without prior agreement between hardware and software companies, there will be hell to pay! Unlike the U.S. digital-recording law, which covers all digital audio devices, the Japanese recording law covers only the DCC, MD, and DAT formats. That’s good—CD-R can’t go forward until the question of royalties is settled.

Throwing the paper down on the desk, you start pacing. The Athens agreement had this thing under control, but now they’ve let the cat out of the bag. Unless you take immediate action, CD-R could spoil everything! Well, at least you still have the trump card—unlike CD-R, your new digital formats offer the benefits of erasable recording. Then your eye falls on a secret prototype disc, glittering blue and silver on the edge of your desk. You shudder involuntarily—your very worst nightmare. Oh, my God! What if...? (to be continued next month [Feb. 1994]).

Source: Stereo Review (01-1994) BY KEN C. POHLMANN

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