Now that initial easy sales are a thing of the past, reality has settled in for small manufacturers of CD-R duplication systems. Future industry growth now depends upon exploiting new markets and applications. To take advantage of untapped opportunities, industry consolidation is necessary, and is, in fact, already happening.
CD-R Duplication Consolidation – A Step In The Right Direction
TapeDisc Business, December 2000
Now that initial easy sales are a thing of the past, reality has settled in for small manufacturers of CD-R duplication systems. Future industry growth now depends upon exploiting new markets and applications. To take advantage of untapped opportunities, industry consolidation is necessary, and is, in fact, already happening. For example, last year Trace Digital acquired printer manufacturer Affex and Belgian reseller M.D. Systems, and earlier this year Rimage Corporation purchased rival Cedar Technologies. The latest deal saw Microboards Technology swallow industry veteran Champion Duplicators.
Champion in 1993 began manufacturing and reselling standalone 3.5″ floppy diskette copiers and label printers. In 1996, Champion changed directions as it started supplying the growing demand for manual and automated CD-R duplication solutions. In an effort to differentiate itself and reach new markets, Champion was the first to offer inexpensive autoloading copiers and inkjet printers. It even courted more mainstream distribution through a brief relationship with UK reseller Traxdata. In the long run, however, Champion’s strategy failed and it voluntarily filed for chapter 11 protection at the end of 1999. Microboards Technology recently acquired the remnants of Champion and has given it new life as Microboard’s manufacturing division.
In contrast to Champion, Microboards has prospered as the primary U.S. distributor for Taiyo Yuden, Hoei Sangyo and Cedar Technologies. In an effort to expand, Microboards is now pushing into vertical markets such as video production, medical and pro audio, with the acquisition of Champion supporting these efforts with lowcost automated systems. In addition, the acquisition will increase Microboard’s size and place it on a footing where it might actively compete with industry leaders Rimage, MediaFORM and Microtech Systems.
The presence of additional strong players like Microboards will hopefully spur product refinement and market development. Almost all of the companies now involved in CD-R duplication systems originally began serving the commercial software or audio industries and are having difficulty expanding. Future market growth depends on tapping new vertical markets and products that enter into general corporate office use.
If CD-R production systems ever equal shared network laser printers, none of the products currently on the market come close to being ready for wide-scale office use. Existing products lack physical robustness and software stability, are complicated and have interfaces only a mother could love. In terms of the current players themselves, most enjoy only limited engineering resources. New products also require new customers. It’s unlikely that any of the existing companies have the recognizable brand name, channel presence, and financial resources to move marketing beyond a limited number of VARs and integrators.
Investment money is hard to come by for profitable, small companies such as CD-R duplication equipment manufacturers. For the duplication industry to reach its full potential, it would seem essential that a large external player enter the market. The best analogy to draw upon is Hewlett-Packard’s entrance into the aftermarket CD-R recorder business in 1995. Up until that time, products were available only from small players such as OMI, Plasmon, JVC, Philips LMS, Meridian Data and Pinnacle Micro. As anticipated, HP’s discipline improved the technology and HP’s name proved critical in building awareness. HP’s retail insight, distribution and channel presence brought on real market growth. Today, CD-R/RW recorder kits are over a billion dollar business with HP.
Speculation about when heavyweights might do something similar for CD-R duplication systems yields names such as Hewlett-Packard, Canon, Ricoh and Xerox. Would it not seem to be a natural evolution to their printer and photocopier business? Although no market studies have been conducted, it’s generally thought that the combined revenues of those selling CD-R duplication equipment this year will be around $125 million. At least 40 percent of the 4 billion or so CD-R discs that are sold this year will be used for duplication, with analysts projecting total consumption of CD-R discs to be at least 50 billion units over the next four years.
With dozens of manufacturers currently offering some kind of CD-R duplication equipment it’s likely that the purchase of Champion Duplicators by Microboards won’t be the last acquisition to visit the industry, nor should it be. In this business, bigger is indeed better. Customers will benefit and new opportunities will present themselves as strengthened players expand their offerings and in doing so, inspire innovation by their competitors.
It remains to be seen, however, how successful CD-R production equipment will ultimately prove to be in pushing its way into the larger corporate and business market and whether the current crop of manufacturers will be up to the challenge.
ABOUT THE AUTHOR
Hugh Bennett, editor-in-chief of Hugh’s News, is president of Forget Me Not Information Systems, a reseller, systems integrator and industry consultant based in London, Ontario, Canada. Hugh is author of The Authoritative Blu-ray Disc (BD) FAQ and The Authoritative HD DVD FAQ, available on Hugh’s News, as well as Understanding Recordable & Rewritable DVD and Understanding CD-R & CD-RW, published by the Optical Storage Technology Association (OSTA).
Copyright © 2000 Knowledge Industry Publications / Hugh Bennett