Multimedia: Buyers get message about the new medium: A CD-ROM boom has come within 12 months for a business which was low-volume and high-price, writes Tony Feldman

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The Independent Tech
THE WORLD'S fledgling multimedia industry has had a shock. After years in a commercial wilderness, a market for its products has arrived. People are at last buying multimedia - and in volume.

The most dramatic events have taken place in America and have come from an unexpected direction. In the space of 12 months, the market for information on compact discs read by computers (known as compact disc read-only memories or CD-ROMs) has been transformed from a low-volume, high-price business supplying libraries and companies with professional and business databases - to a multimedia mass entertain ment and information market.

During 1993, American consumers who had spent virtually nothing on bringing CD-ROMs into their homes in the past, spent dollars 200m ( pounds 130m) on CD games, reference and education.

Evidence from the US suggests that this tidal wave is still building and that 1994 will be a real bonanza for CD multimedia publishers. The surprise about these developments is that the growth has been in sales of CD-ROMs. These discs need to be played back on powerful desktop computers, the kinds of devices commonly used in professional and business settings but not generally welcome in domestic living rooms.

Most people in the industry have believed that the home market for multimedia would be established by special, evolved forms of CD-ROM designed to be played on simple, 'black box' appliances connected, not to computer screens, but to ordinary televisions. The consumer electronics giant Philips, for example, has gambled much of its future on a system of this kind called CD-i and in nearly three years has sold fewer than 400,000 players world- wide. While CD-i still has a good chance of a successful future in Europe, other gambles have been disastrous. Commodore, for example, tried to launch a home system called CDTV and a CD multimedia games console known as CD32. Both have failed, leading Commodore into bankruptcy.

While multimedia appliances such as CD-i struggle to make an impact in the consumer market, computer-based multimedia is taking off. The reason is simple. Consumers in the US have started buying sophisticated desktop computers for use in their homes. Last year, more than 65 per cent of all PCs, about 5.6 million, were sold to American homes. Currently about one in three US homes has at least one computer. And the machines are powerful, desktop devices increasingly equipped with CD-ROM drives able to play back high quality sound and images, and video.

In a matter of months, the CD-ROM publishing business in the United States has changed from addressing a specialised corporate and professional audience to one that entertains, informs and educates ordinary consumers. The scale of the transformation is staggering. In 1991, only 2 per cent of all the CD-ROM drives in the US were in homes. At the end of last year, the figure was 60 per cent. Forecasts suggest it will reach 75 per cent by the end of 1996.

The underlying change, however, is a fundamental shift in the role of computers. It looks certain that PC screens will increasingly challenge televisions as the main source of multimedia information and entertainment in homes. This argument has been strengthened by another US phenomenon. A growing number of the people buying PCs are equipping them with modems, the devices which allow computers to be linked to telephone lines so they can both receive and send messages and information over national, international or even global networks.

This in turn has led to a huge growth in the use of online information services - great warehouses of electronic information which can be accessed by a computer via a telephone connection.

Just as multimedia CD-ROM has suddenly become big business, so the companies running online services - such as CompuServe, Prodigy, America Online and Genie - are rapidly expanding.

Because they use ordinary telephone lines, most of these commercial services are dominated at present by text-based information. But this is changing. As modems get faster and telephone networks are upgraded, images and sound are enriching online offerings. The real revolution is still to come, however, as the online publishing industry moves towards connecting itself to telephone lines and cable television systems.

In Europe 25 per cent of the

1 million or so CD-ROM drives currently in use are already in homes. By 1996 this will have grown to 50 per cent out of a total of 7 million drives.

The author is a strategic consultant specialising in the impact of digital technologies on the media industry.