CD-ROMs: Crash Ahead?

Despite Soaring Growth, Some Say Medium's Future Isn't As Rosy As It Seems

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Can the CD-ROM market continue to spin, or is it destined to spin out?

That question is on many minds as the hot young industry enjoys torrid growth projections, but faces persistent concerns about its long-term viability as an interactive medium.

In the near term, virtually everyone who tracks the technology says the market will continue its explosive growth. Market researcher Dataquest predicts 17 million CD-ROM drives will be shipped in 1994, up 153% from 6.74 million in 1993.

This growth in the installed base of drives will trigger dramatic growth in the sales of CD-ROM titles. Dataquest estimates worldwide factory shipments of consumer CD-ROM titles-including reference, entertainment and educational works that typically sell in the $25 to $100 price range-will rise to $450 million this year and to $2.5 billion by the end of 1997, a nearly 700% increase over last year's $325 million.

"CD-ROM drives have graduated from an after-market phenomenon into a major [original equipment manufacturer] system market," said Dataquest analyst Patty Chang. "They have become a part of the standard configuration, and that is really pushing up the volume."

Despite such projections, nagging questions continue to overshadow the market. In the long term, there is the very real possibility that the development of high-speed, high-capacity transmission capabilities via cable or some other technology will undercut the advantages of CD-ROM delivery and reduce it to an interim technology.

As a result, many CD-ROM developers are hedging their bets by emphasizing that they are consciously developing products that can be transferred to any high-speed medium that might emerge.

The idea is to think of a video server as nothing more than a big, faraway CD that would be connected by a "big pipe" that runs into the home, but that would work fundamentally the same way that a CD-ROM drive does.

CD-ROM "will remain a viable medium as a library resource for information- and education-based products" like encyclopedias, said Susan Sandler, director of new technologies for Frank N. Magid Associates, a Los Angeles-based researcher.

But "as online services become faster, consumers will choose to use online services for more dynamic applications," she predicts. "It really depends on the applications."

Even before the CD-ROM industry can face such challenges, it still must prove itself today. A disturbingly high level of customer complaints have been surfacing about such things as high prices, disappointingly poor content quality, slow interactive speeds and installation difficulties. An unsettling Dataquest study found that less than 50% of those who bought their first CD-ROM titles bundled with a PC purchase returned to buy additional new titles.

In part, the customer dissatisfaction stems from the haste with which developers have scrambled to bring products onto the red-hot market quickly. Customer disappointment also has arisen because the first wave of CD-ROM products has not made good use of the medium's ability to showcase full-motion video, audio and animation.

"CD-ROM is a very complicated medium, and people are still learning how to create original content for it," said Maureen Fleming, editor of the Information Industry Bulletin, published by the Stamford, Conn.-based Digital Information Group.

"A lot of the early products have been reference titles that are aiming at the evergreen market," Ms. Fleming said. "The evergreens are not a bad business, but it is far from the most interesting."

Compton's NewMedia is among those making sure it isn't left behind.

A perennial leader in the reference market with its interactive encyclopedia, football, and jazz history titles, Compton's this fall will release the first in new line of personal improvement CD-ROMs under the umbrella of "Focus for Success."

Unlike Compton's reference-oriented CD-ROMs, the new product is designed for "tailored interactivity." The disc features a test that measures the user's personality traits and aptitudes, then recommends suitable jobs, avocations and entertainment.

"CD-ROM is infinitely superior to any other medium to integrate dynamic personal data with valuable instructional information," said Norman J. Bastin, Compton's exec VP-general manager.

Another emerging trend links CD-ROMs to online services. This approach makes it possible to create products that are rich in graphics and video, but that can be updated and changed easily-something CD-ROMs by themselves can't be.

Several CD-ROM developers are working in this area, including Microsoft Corp., which earlier this year unveiled Complete Baseball, a CD-ROM detailing the sport's history as well as team and player statistics. Owners of the CD-ROM can, for a fee, download daily game updates via online connections.

Another developer, Mammoth Micro Productions, claims almost all of its new CD-ROM products will incorporate online links.

"Eighty percent of the products that we will build over the next year will have an online component," with the first of Mammoth's "dual-media" CD-ROMs slated to roll out this fall, said Bob Ogdon, Mammoth president.

Such links to online services, however, could turn out to be just stop-gap measures. Several major online services are testing cable links that would allow graphics and video to be transmitted quickly and easily-diminishing much of CD-ROM's appeal today.

But however dazzling a combination of audio, video and text this new generation of CD-ROM products offers, trackers of interactive technologies predict more dramatic developments to emerge as early as 1995, including major advances in such things as three-dimensional rendering capabilities and the creation of entirely new types of user-interfaces.

"The things people are doing right now," predicted Ms. Fleming of the Digital Information Group, "are not even close to resembling what's to come."

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