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Audio formats stumble in quest to replace CDs

The appeal to consumers was supposed to be better and more lifelike sound quality. The appeal to music companies was supposed to be a new digital format that consumers couldn't Napster-ize or cheaply copy so it could be sent across the Internet to all their friends.
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

The appeal to consumers was supposed to be better and more lifelike sound quality. The appeal to music companies was supposed to be a new digital format that consumers couldn't Napster-ize or cheaply copy so it could be sent across the Internet to all their friends.

But instead, two newish audio media formats, DVD-Audio and SACD (short for "super audio compact disc"), seem to be stuck at the starting gate. Rather than replacing the enormously successful CD, these two formats are starting to look like two Next Big Things that may never find a place in tomorrow's all-digital, relentlessly networked living room.

The lack of enthusiasm adds yet another chapter to the hit-or-miss nature of digital innovation, and, experts said, a cautionary lesson in what happens when companies try to impose new restrictions on a product where once there were few or none at all.

Both of these shiny, palm-sized discs look just like standard audio compact discs but contain about six times as much digital information, delivering a sonic picture so detailed their backers brag you could practically hear Mick Jagger strut his stuff across the stage.

Both have been available since 2000 and cost about the same as a CD -- while the machines needed to play each disc cost only about $200, slightly more than traditional CD gear. Yet for both, sales have been negligible.

During the six-month period ending in June 2003, only 100,000 DVD-Audio discs were sold, compared with 245 million CDs, the Recording Industry Association of America reports. Even traditional vinyl records outsold DVD-Audio -- by a factor of six to one.

Rather than growing, sales of DVD-Audio discs are actually down from the same period a year ago. The RIAA does not track SACD sales.

Three years might not seem like a long time for a new format, but by this point in the CD's life cycle, sales had begun to triple and quadruple as consumers lined up to buy into the format.

The CD had a smoother road to introduction. The recording industry and the consumer electronics industry presented a united front when they sold the world on the benefits of the CD 20 years ago, but with the newer formats, there is no unanimity. Each is backed by different industry players (for instance, Warner Music Group likes DVD-Audio, while Sony Music Entertainment Inc. supports SACD). Even many audiophiles with golden ears can't tell the difference between the two.

It's "shades of Beta versus VHS," said Tom Edwards, analyst at NPD Group Inc., a market research firm. "It's a format war all over again, but the differences aren't as obvious this time around . . . and right now it's more a question of whether either of them will win."

"It's fair to say neither format has set the world alight to date," said analyst Jim Bottoms, president of Understanding & Solutions, an English firm that specializes in entertainment media research.

To keep users from easily copying songs featured on DVD-Audio discs and SACDs into MP3 files, both formats use encryption technology, which is supposed to keep the digital information in those song files locked away and unreadable except by authorized DVD-Audio or SACD players.

Since consumers have proved reluctant to buy a format they can't play in their car, SACD backers are offering "hybrid" discs which also feature unprotected (or copy-able) CD layers. A hybrid DVD-Audio is also in the works. Since the CD format was not designed with such security in mind, users can still copy song files off of discs that have this CD layer.

Still, there are no portable, Walkman-style devices to play either format, nor can either type of disc be played in any car except the 2004 Acura TL, which includes a Panasonic DVD-Audio unit.

Some low-cost "home-theater-in-a-box" systems from Sony or Philips include SACD compatibility. And music buyers may have to look through the liner notes to discover they've bought an SACD. Sometimes it is more difficult.

When Sony re-released the Rolling Stones catalog as hybrid SACDs, it left out the word "SACD" on the packaging material -- folks at the label feared the albums would be relegated to some "high definition" bin in the far corner of record stores. The reissues sold about 2 million copies.

David Kawakami, director of Sony's SACD efforts, said that hybrid discs have allowed the company to "get around the whole chicken-and-egg conundrum" that is common to new technological formats.

Though he admits that many owners of the hybrids don't have SACD players yet, he thinks they're still good marketing. "If you're a die-hard fan you're probably going to want to check out the SACD player at some time," he said.

David Dorn, vice president of strategic marketing at DVD-Audio backer Warner Music Group, pointed out recent DVD-Audio releases by R.E.M. and Outkast as a sign that big-name recording stars are beginning to take to the format.

"If we're able to get more artists to work in the format, I think it's really going to work," Dorn said. "It is always the artists who drive the adoption of a format."

While record companies have been choosing sides over which type of disc to support, consumer habits have been drifting away from discs entirely.

Apple's online music store iTunes, just one of a number of new online shops that sells copies of individual tracks for consumers to download to their computers, recently sold its 30 millionth song since it opened up this spring.

The research firm Ipsos-Insight estimates that roughly 10 million Americans paid to download music or MP3 files off the Internet in the first half of the year.

Sony's Kawakami has seen this behavior firsthand. "My 17-year-old daughter lives on her Mac, it's her portal to the world -- she does everything on it, including listening to music. For the time being, she's tied to her Mac and her iPod."

Kawakami hopes she'll be won over by SACD when she gets older.

"I have a feeling that, when she grows up, she's going to desire quality, and she's going to end up buying the albums of several bands she was introduced to on the Internet," he said.