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Sony's PlayStation 2 to Spur DVD Industry
TOKYO (Reuters) - Sony Corp's launch of its new PlayStation2 video game console, the world's first with a digital video disc (DVD) player, should give Japan's struggling DVD market a chance to finally take off, analysts said.

Japan's DVD market has long suffered from weak turnover in both hardware and software, a vicious cycle as poor sales in one undermine sales in the other.

"PlayStation2 will definitely open a new door for the DVD market," said Kazuharu Miura, analyst at Daiwa Institute of Research.

"People will become more familiar with DVDs, and most importantly, we should see a wider range of software hitting the market."

Vhs Still King

Japanese consumers, usually quick to pick up the latest new gadgets, generally have opted for traditional VHS video players over DVDs, also known as digital versatile discs.

Although DVDs boast superior audio and visual quality to conventional VHS or compact discs (CDs), and offer higher data storage capacity, most Japanese have balked at the price for both the players and the discs themselves.

Sony could change that.

Despite being primarily a console for playing video games, PlayStation2 can also be used as a conventional DVD player, playing back movies or audio CDs.

Analysts reckon some buyers will be just as interested in using the console as a DVD player as for the games, especially since its 39,800 yen ($357) price tag is about half the price of most DVD players.

This means that from March 4, when PlayStation2 is launched in Japanese stores, the country's DVD market will have an entirely new swathe of consumers.

Motoharu Sone, an analyst at Universal Securities, predicts sales of DVD players should double over the next year.

"Domestic production capacity of DVD players should be around 12 million for calendar year 2000, nearly double that of 1999," he said. "The launch of PlayStation2 should play a big part of that."


Analysts say the progression makes sense given the inherent advantages of DVDs, from the high-quality graphics in the format to their conveniently slim size.

But the current limited range of DVD software and high prices for videos will likely constrain growth, particularly since DVDs are not yet recordable which means VHS players will continue to play a key role in most modern living rooms for some time.

DVD videos normally cost around 8,000 yen ($70) per disc in Japan, while the selection of movies has been limited. In the United States and other Asian countries, the price is generally far lower and the selection much wider.

The popularity of rental VHS videos has also Marginalized DVDs in Japan, although most industry experts say consumers could just as easily rent DVDs if players such as PlayStation2 become an affordable alternative and DVD movie titles in expand.

They cite the explosion of audio CDs over vinyl records and audio tapes in the late 1980s and early 1990s as one recent example of how DVDs could eventually take shape.

In Japan alone, PlayStation2 is expected to sell nearly 22 million units over the next five years.

But the industry suffered a setback late last year when DVD makers in Japan were forced to postpone the launch of new audio-visual DVD players after a European hacker posted details on the Web on how to override the copyright protection of DVDs.

Software In Store

A marketing manager for Sony Computer Entertainment said the company expected the launch of PlayStation2 to prompt the release of more software.

Although analysts expect it may take 15 years for the DVD market to grow to critical mass and drive down prices of DVD videos to those of current VHS videos, PlayStation2 is seen familiarizing consumers with the merits of DVD technology.

"We are expecting a wider range of DVD software to be released after PlayStation2... not only games but also movie titles," the marketing manager said. "We don't have specific targets, but such a trend should give consumers incentive to choose DVD players in coming years."

($1-111.35 Yen)

By Ritsuko Ando

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