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Thursday, May 19, 2005
2004 a Very Tough Year for Optical Disc Manufacturers


While there was much technical progress made in the development and production of various and optical disc formats in 2004, many of the companies producing them had a very difficult time making a profit from their media operations.

The common grades of recordable optical disc media, mostly CD-Rs and DVDRs, were produced in very large numbers in 2004, but very little profit was made on any of them. The explanation is not difficult if you consider that even the highest grade CD-R discs have to be offered (by manufacturers) for less than $0.12 to large OEM buyers. The oversupply situation in DVD-Rs haunted all of the producers last year, and has not improved much during the first four months of 2005. Most of the estimates for full-year 2005 DVDR output, which typically fall between 3.25 and 4.0 billion units shipped, will probably not be achieved.

Both CMC and Ritek, the two largest recordable optical disc manufacturers in the industry, went out of their way to note that their April sales revenues were the highest in an entire year. While this is true, and certainly is encouraging, they were still five percent or more below April 2004 revenues, and for the first four months of 2005, both companies' revenues were about 25 percent below the same period a year earlier. Both hope to become involved in the manufacture and sale of recordable high-definition optical disc media, whichever the type chosen as standard, or both types if this proves necessary. However, it will be some time before such products can add anything to their balance sheets.


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