Tay Vaughan - Multimedia Platforms

Presentation by Tay Vaughan, President
Timestream, Inc.
Smart Media Conference
Sheraton Towers, New York, NY
October 26, 1993

PCs are the most common computer attached multimedia platforms. A conservative estimate in 1992 shows 2.1 million CD-ROMs are attached to PCs. Of these 2.1 million, only 800,000 CD-ROMs have the multimedia capabilities (386 and above). This represent 38 percent of installed CD-ROMs used for multimedia. This low number of CD-Rom's used for multimedia is expected to increase rapidly since all new PCs are at least 386 or above.

The 1992 figure of 38 percent is distributed between household and business with the majority of CD-ROMs towards business. Because of this unequal distribution, the primary market for developers lie in the business sector. Titles that might be suitable for this market may therefore include the following:

• Accounting and Finance Applications
• Employee Training Programs
• Business Organization and Strategic Planning
• Business Presentation Tools

The MPC market is expected to grow rapidly in the near future. It is estimated that shipments of multimedia ready PC will reach 3 million units in 1993 and continue to grow close to 5 million in 1996 as shown in chart on below (source: The New York Times, Dataquest).

The connecting rate for between CD-ROMs and MPC has been estimated to 2.5 percent. The household market is expected to absorb a greater amount of the installed CD-ROM distribution and therefore create a market for edutainment, infotainment, reference, and game titles.

The Macintosh computers are more suitable for multimedia delivery and therefore has a larger number of multimedia titles available to its format. About 68 percent of all multimedia titles available represent Macintosh format and the rest 32 percent represent PC format as shown in the picture (Dataquest -93, p.18).

The number of attached CD-ROMs in 1992 is 600,000 which of 400,000 has multimedia capabilities (all systems except Plus and SE). This represent 67 percent of Macintosh attached CD-ROMs compared to only 38 percent of MPC attached CD-ROMs. In addition, the connecting rate between Macintosh computers and CD-ROMs is estimated to 6 percent compared to 2.5 percent for MPCs as shown below (Source; Apple's Mkt research report, p 13).

Computer attached multimedia CD drives (MMCD drives) are referred to Macintosh and MPC machines that are capable of delivering multimedia titles. That is, in 1992, 800,000+400,000=1,200,000 units as explained in the pervious section. It is estimated that only 1/3 of 96 million U.S. households are computer literate and the about half of these household use their computers in business. Because of the lack of computer knowledge, the Consumer Appliance Players businesses are targeting the rest (2/3) of the U.S. household market.

Consumer appliance players are referred to all multimedia players that are not attached to computers. This market is larger and is expected to grow more rapidly then the MMCD market because of the lower cost and the limited computer knowledge that is required. The installed base of consumer appliance players is expected to 28,600,000 units in 1997 as shown below. Some common players that should be considered include Nintendo, Sega, 3DO, CD-I, CDTV, Data Discman, Photo CD, and VIS. The 1993 sales of some of the consumer appliance players has been estimated by Optical Publishing Association as following.

Nintendo & Sega are the main players in the consumer appliance market and therefore major competitors. In 1992, many believe that Sega and Nintendo share the market 50/50. Their estimated sales for 1992 was 5 million units each. It is believed that this competition foster a rapid advancement in technology trends. Their 8-bit market is expected to be completely dead well before 1998 and replaced by the 16-bit systems.

The 16-bit systems is expected to be profitable until 1995 when this system is expected to be replaced by either a 32-bit system, optical disc, and/or a specialized chip.

In 1994, the Nintendo CD and the enhanced Sega CD, both on 32-bit bases, will be introduced. This step is expected to cause the CD-ROM to be an important component in the interactive entertainment market by 1998 (source; Home Video Gaming and Electronic Entertainment Through 1998, p. 3-8).

• Projected year end sales of 200,000 for the $299 units.
• CD-ROM add-on for the Sega 16-bit Genesis gaming system sold out all $35,000 units of its first shipment within 48 hrs last fall.

3DO's interactive multimedia player will be available in the U.S at the end of December 1993. It will be able to play audio compact discs and display Photo CDs in addition to it's own titles developed by third party software developers. The multiplayer is based on a 32-bit processor that is believed to outclass the present 16-bit Sega CD.

According to Infotainment World, Inc., 3DO is expected to become a general excepted format by 1998 and compete for a market share together with Sega and Nintendo (source; Home Video Gaming and Electronic Entertainment Through 1998, p. 8).

• The machine delivers real time, 32-bit processing of complex animation, video, and sound • Expected to ship October 1, 1993 for about $750 • There are 75-100 ???? titles in production and only about 25% of them are games • 3DO will have to compete with Sega and Nintendo which are going to have its own CD-ROM capabiblity by January 1994

All the above infomation comes form "New Media" May 1993 issue p.40

• The company plans to put its core technology onto plug-in boards for the MPC and other computing platforms
• Disadvantages: 3DO needs good software titles to sell the device and the developers are loathe to write titles for a device that is not in millions of homes
• 3DO's platform includes a standard double-spin CD-ROM drive, a multi purpose port for musoc and computer keyboard, joy-stick or mice.

The above infomation comes for "MultiMedia World", a special saction of PC World, Feb 1993. p.39-41

• Selling in tens of thousands of units a year • Only about 25,000 are shipped within United States • Some believe, especially Optical Publishing Association's Rich Bowers, that CDI, CDTV and VIS has flopped either because costumers do not buy it or the manufactures do not sell it.

Source: New Media: Optical Publishing Association

The cost to develop a similar title for Sega, CD-I, CD-ROM, and 3DO platforms has yet to be determined. However, the average costs for developing a title on the different platforms are estimated below (source; The Green Sheet, Feb, Issue 1, Vol. 5, 1993, p.4)

In SJ001, World's First Show for Interactive Entertainment to Focus on Growing $8 Billion Retail Market, moved yesterday, the number in the final graph, second line, should read "800-800-5474," rather than "800-600-5474" as originally transmitted. Complete corrected release follows:

WORLD'S FIRST SHOW FOR INTERACTIVE ENTERTAINMENT TO FOCUS ON GROWING $8 BILLION RETAIL MARKET

ATLANTA, Nov. 30 /PRNewswire/ -- Producers of the first international trade show dedicated exclusively to entertainment software titles, programming and licensed properties, today announced Atlanta has been selected as the first site for the annual Spring buying event scheduled to debut at the giant Georgia World Congress Center April 7-9 in 1995. The 340,000 sq. ft. "Electronic Entertainment Expo" will be produced and promoted jointly by Infotainment World and Knowledge Industry Publications.

Expected to attract more than 30,000 top-level buyers of interactive software titles -- as well as publishers, international rights owners, press and the financial community -- this unique trade show has been designed to assist retail buyers in making purchasing decisions that influence the annual sale of some $8 billion in interactive entertainment programs. An estimated 10,000 game and "edutainment" titles are now on the market for more than a dozen competing entertainment technologies, including video game machines, CD-ROM, CDI and 3DO systems, as well as multimedia personal computers.

"The content side of the home electronic entertainment industry is exploding, requiring a dedicated trade buying event at the right time of the year for both retail buyers and vendors," noted Patrick J. Ferrell, president of Infotainment World, a subsidiary of the giant IDG Communications group and publisher of the widely read GamePro and Electronic Entertainment magazines.

More than 300 exhibitors will present their products at an electronic shopping extravaganza that will also include a host of seminar programs aimed at helping retailers better select, merchandise and promote the latest in interactive entertainment programs.

Representatives of all the major retail channels (mass merchants, department stores, toy chains, video, book and record stores, electronics superstores, specialty dealers, price clubs, catalogue showrooms and direct marketers) are expected to come together with developers, publishers, producers, manufacturers and distributors of interactive entertainment products for what will become a single, convenient Spring buying event each year.

The Electronic Entertainment Expo will be an important forum for the entire interactive entertainment industry and a place where interested parties can cement strategic alliances, license character and movie properties, generate venture capital and showcase the media innovations in software that are likely to drive wider adoption and use of interactive electronic systems.

A portion of the show also will be dedicated solely to developers and programmers -- those authoring platforms, replication and packaging services and software required to create titles. (A separate seminar program is planned for developers, publishers and rights owners who produce and market titles.)

"There are now over 150,000 retail outlets selling electronic entertainment software across more than 10 major distribution channels in the U.S. alone," said Ferrell. "The business is going to grow exponentially as interactive technologies penetrate a greater percentage of the worldwide market," he added.

"The big challenge for retailers is having the time and insight to evaluate the multitude of software titles coming to market and deciding which are going to be sure-sellers and merchandising draws," noted Eliot Minsker, chairman and chief executive officer of Knowledge Industry Publications, producers of leading conferences and annual trade shows like Smart Media International, IMAGE WORLD and REPLItech International.

Help in Making Smarter Buying Decisions

"Retailers have pointed to the need for an interpretive event that will help them make smarter buying decisions by interacting with a wide range of publishers, vendors, industry influentials and opinion leaders in a focused show setting. With so many new and exciting electronic entertainment choices coming to market, retailers are looking for a much larger slice of consumer spending in a highly competitive leisure market," Knowledge Industry's Minsker added.

Infotainment World estimates that thousands of new electronic entertainment products and services will debut in 1994, including video game cartridges for Sega and Nintendo players, multimedia PC and Macintosh hardware/software, add-on peripherals and accessories, dedicated gaming systems, CD-ROM, CD-I and 3DO devices, interactive TVs and controllers, as well as interactive TV program networks.

According to Link Resources:
-- More than $6 billion is spent on home video gaming annually. -- Nearly 20 million home PCs are used for entertainment. -- Sales of consumer entertainment PC software in 1993 will top $360 million. -- About 3 million households have PCs with CD-ROM drives. -- Some 65 million homes receive cable TV of which 20 million have interactive potential.

Infotainment World, a $25-million unit of IDG Communications, publishes GamePro, S.W.A.T. Pro and Sega Visions magazines. IT also produces a variety of tip books, strategy guides and home videotapes, along with the unique half hour weekly GamePro PowerUp! TV show. The San Mateo, Calif. company also publishes PlayRight, a bimonthly parent's guide to electronic entertainment, and will launch a new interactive entertainment magazine, Electronic Entertainment (E2), next month. Combined circulation of its publications exceeds two million. IDG publishes over 194 computer-related publications in more than 62 countries.

Knowledge Industry Publications Inc., of White Plains, N.Y., has produced more than 100 technology-related events during the past 25 years and also publishes four magazines with a combined circulation of 150,000. Its titles include AV Video, Computer Pictures, Multimedia Producer, Tape/Disc Business and Teleconferencing News, reaching key decision makers and professionals in the presentation arts, electronic image creation, computer graphics, digital data storage and video teleconferencing fields.

More information on the Electronic Entertainment Expo can be obtained by calling 800-800-5474.

/CONTACT: Linda Cohen of Knowledge Industry Publications, 914-328-9157; or Debra Vernon of Infotainment World, 415-286-2504; or Gary Quackenbush or Bill Freed of Neale-May & Partners, 415-328-5555, for Infotainment World/

System	Sales	Installed base

Photo CD	75,000	95,000
Sega	750,000	970,000
MS Dos PC	650,000	2,650,000
MPC	1,500,000	2,300,000
Macintosh	750,000	1,175,000
Other	189,000	355,000
Total	3,914,000	7,545,000

Sega:	As high as 1.3 million
CD-I:	300,000 to 800,000
CD-ROM:	60,000 to 250,000
3DO:	300,000 to 500,000