New Disk a Contender for CD’s Titles

Digital technology is built on an elegantly simple foundation, a universal language of ones and zeros. Yet when it comes to storing those ones and zeros, the electronics world is a mess of incompatible memory cards, sticks and disks.

DataPlay Inc., a start-up bred in a Rocky Mountain hotbed for data-storage engineers, hopes to lead consumers out of the chaos with a new, universal format.

A wafer-thin disk encased in a 1 1/4-inch square of plastic, each piece of DataPlay media can hold at least five hours of CD-quality music, one hour of video, one console-style video game, 1,000 high-resolution digital photos or 100 e-books.

It’s a masterpiece of engineering that gives at least one multibillion-dollar business--the music industry--exactly what it wants: a new medium that resists piracy.

More than 20 years have passed since the introduction of the compact disc, which boosted sales by prompting music lovers to buy new versions of the records they owned. Now CD sales are flat, and the industry needs a jolt.

The disks’ multimedia capabilities and encryption technology could spark new approaches to selling music, movies and other digital material. For example, record companies could load a 500-megabyte DataPlay disk with music videos, backstage photos, tour schedules and older albums waiting to be unlocked for an extra fee.

For every new format that reached mass acceptance, however, there are a dozen or more that didn’t. One reason is the fierce competition among electronics companies, many of which bring their own formats to market.

A more fundamental question is whether the public will embrace any new format for portable storage, particularly one that works only on new devices built for that format.

In the not-too-distant future, consumers will be connected continuously to the Internet at high speed, and their devices will talk to each other wirelessly. They’ll download digital music and movie files from the Web and store their collections on computer hard drives instead of bookshelves.

With technology like that, why would anyone need disks? That world is still a few years away, yet some analysts say it’s close enough to spell trouble for DataPlay.

“DataPlay is caught between a rock and a hard place, the rock being the CD and the hard place being the advent of digital music [online],” said analyst Mark Mooradian of Jupiter Media Metrix, a technology research and consulting firm. “It becomes very difficult to imagine a place for a format like DataPlay. It looks very transitional.”

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Engineering Delays Push Back Debut

To make matters worse, engineering delays pushed DataPlay at least six months behind schedule. Instead of making their debut last fall in time for the holiday-shopping season, the disks and players are now expected in April.

Those delays have left a number of consumer electronics and media companies in a we’ll-believe-it-when-we-see-it mode. “If DataPlay matures to the point where it’s accepted by the mass market, then we would be more inclined to produce devices,” said Phil O’Shaughnessy, a spokesman for consumer-electronics manufacturer Creative Labs.

Steve Volk, DataPlay’s founder and chief executive, shrugs off the delays. Factories belonging to partners in North Dakota and Taiwan are cranking out blank DataPlay media as fast as they can make it. Another partner in China is assembling tens of thousands of the tiny, box-shaped “storage engines” that will read and record the disks, supplied by optical components from DataPlay’s own plant in Singapore.

“We are in volume production now,” Volk said, adding that the rest of the pieces are largely out of his company’s control.

DataPlay’s headquarters are in Boulder, a college town that became a mecca for data storage after IBM Corp. put a pioneering magnetic-storage plant here a quarter-century ago. Volk made a name for himself as an entrepreneur in that area, credited with helping a series of companies develop the pint-sized hard drives used by laptops, personal digital assistants and Apple’s iPod MP3 player.

After devising the concept for DataPlay in his basement four years ago, Volk pulled together a team of experts from the magnetic and optical-storage fields. The basic idea was simple: to create a small, inexpensive disk that stored information as densely as a DVD.

Turning Volk’s cardboard mock-ups into working models, however, required a series of technological leaps.

Chief Technical Officer Dave Davies, a former 3M engineer who helped introduce the CD-ROM, said DataPlay had to come up with much more effective error-correction technology while dramatically cutting the size and power consumption of the components that read and burn the disks.

Like a DVD recorder, the DataPlay engine uses a laser to change the physical properties of a blank disk, creating a digital code of bumps and pits in the disk’s grooves. The optical components that do this work are “the world’s smallest by a very large margin,” Davies said.

The disks can be recorded only once, a significant sacrifice that DataPlay made for the sake of disk longevity and battery life. But unlike virtually every other kind of media, the double-sided disks can offer prerecorded material with blank space for consumers’ data.

That means consumers buying a new U2 album on DataPlay, for example, could customize the disk with older U2 songs and pictures from a U2 concert. Or they could buy an electronic key online to unlock additional albums, videos or other material hidden on the disk.

“We don’t intend to be a small CD,” Volk said. “We intend to give you the tour, the album, the video and a lot more. It’s a different consumer experience.”

Each side of a DataPlay disk has only about one-third the capacity of a CD, but the methods it uses to compress and store audio data are 10 times as efficient. That means a single disk can hold about 80 CD-quality songs, or three albums’ worth of music remastered at better-than-CD quality.

DataPlay ran into delays as it worked to drive down costs and set up production lines overseas, but company officials say they’ve hit all the technical marks. Now, as the first generation of DataPlay devices goes into production, the company is working on ways to boost the disk’s capacity to 1 gigabyte and beyond while slimming the engine’s profile.

Volk said the company has spent $125 million so far, the bulk of it coming from venture capital firms and corporate investors. These include photography powerhouses Eastman Kodak Co. and Olympus Optical Co., chip maker Intel Corp., giant music retailer Trans World Entertainment Corp., and Asian electronics conglomerates Toshiba and Samsung.

Also backing DataPlay is Universal Music Group, the world’s largest record company. DataPlay officials said that three of the five major record companies--Universal, EMI and BMG--each pledged to have 50 hit albums in DataPlay format, although Universal is expected to have only 10 to 15 titles ready by May.

The CD will be hard to replace, given the millions of disc players installed in homes, cars and offices. But the music industry is eager to supplant it with copy-protected media, which not only combat piracy but also enable new business models.

Larry Kenswil, president of Universal ELabs, said the CD makes it difficult for the labels to sell packages of music with fewer rights--for example, an album that could be played only on one device, or for a set amount of time.

“That forces the price of the CD to be very high in the first place, and secondly eliminates the possibility of pricing things lower for fewer rights,” he said.

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Encryption Feature Has Fans and Foes

Any kind of data can be stored on a DataPlay disk, but a DataPlay-equipped music player will play only music files that have been encrypted, Volk said. In other words, a DataPlay device can’t play MP3s unless they’re wrapped in software that prevents them from being copied or moved to other computers.

The encryption features have cooled the enthusiasm of one early backer, Sonicblue Inc., a Santa Clara, Calif.-based consumer electronics company.

“They’ve sold their soul to Universal,” said Andrew Wolfe, Sonicblue’s chief technical officer. “There are so many rules and restrictions about what you can put on the disk and what you can’t put on the disk, it just doesn’t fit into our infrastructure.”

Samsung, Toshiba and San Diego-based E.Digital Corp., on the other hand, all have announced plans for music players, cameras and adapters that enable computers to read DataPlay disks. The first DataPlay device, due April 15, is a $350 player from Evolution Technologies Inc. of Raleigh, N.C., that’s based on an E.Digital design.

Prices will be high initially, because the DataPlay engine costs about $100, said Brad Deifer, chief executive of Evolution. By contrast, supporting a CompactFlash memory card requires a connector that costs less than 50 cents, said Nelson Chan of SanDisk Corp., a leading manufacturer of flash memory products.

Volk said the company’s investors are committed to the format, giving the firm plenty of time to establish the new medium. “I don’t think DataPlay’s viability is an issue here,” he added.

Still, even successful formats take years to win over the masses. Although the proliferation of portable digital gear and the rising concerns about piracy make DataPlay’s timing auspicious, its opportunity is passing quickly.

Prices of flash memory chips and hard drives are plummeting while their capacities double every year.

Within a few years, a fully re-writable 512-MB CompactFlash card will sell for about the same amount as a DataPlay disk and engine cost today.

The labels’ support and the company’s engineering breakthroughs give DataPlay a significant head start in what some analysts see as a race for the next great format. Said Jim Porter, an analyst for Disk/Trend Inc. in Mountain View, Calif., “If this gets done on schedule, with perceived reliability and at the right cost, then Steve Volk has a huge winner.”