Buyer Update: CD-RW Drive Prices to Fall

Move over, PC price wars: Right now there's an equally intense battle for your dollars on the CD-RW drive front. Though the downward price spiral has been going on for months, competition has heated up as next-generation 20X and 24X CD-RW drives hit the market, forcing vendors to sell off existing inventories.

Further sharpening the shears is the slowdown in the PC market, which is responsible for the drive surplus to begin with. Put the two together, and you get great bargains. In fact, by September, some industry experts expect 12X/10X/32X CD-RW drives will be selling for $100, faster 16X/10X/40X drives for $150, and state-of-the-art 24X/10X/40X drives for $200--nearly $100 off the price at which TDK introduced the first 24X drive in June. Such price drops normally happen over six months or so, not three.

Rebate Games

You'll have to read the advertising on these deals closely, however. One way for manufacturers to avoid lowering prices sooner than planned is to push rebate offers--which don't help you unless you redeem them (and which may go astray even then).

Open any newspaper's sales fliers, and you'll see a splash of rebates for CD-RW drives. For example, Yamaha is offering a $240 16X drive with a $50 rebate through year's end.

Too often, though, rebates have been little more than a marketing ploy for many companies. In headier times, a vendor could expect most consumers not to bother sending them in. But cost-conscious buyers now expect rebates to be honored, and vendors know they'll have to pay up.

"We get a much higher redemption rate than we used to," acknowledges Pacific Digital's Tony Tate, vice president of sales and marketing.

Ripping Prices

Why are bargain drives now flooding the market? "It's all about demand and supply," explains IDC research manager Wolfgang Schlichting. "Last year, CD-RW drives had a fairly healthy profit margin, as most computer manufacturers couldn't get all of the drives they wanted."

In response to increasing demand, drive vendors stepped up production, and more manufacturers, such as Samsung and LG Electronics, invested heavily in CD-RW drive production. But buyers began to vanish just as the bulk of new products came to market.

"We have seen a very swift drop in price, especially on 12X models" as a result, says Patricia O'Donnell Smith, hardware product manager at TDK Electronics, maker of PC World's current Best Buy, the 16/10/40 VeloCD ReWriter.

Moreover, cheaper 12X models affect 16X drive sales. "There's always the pressure from the bottom," explains O'Donnell Smith, who says buyers expect to pay $50 for the next highest speed. "If the price drops majorly on 12X, then 16X will have to follow."

Will It Last?

Faster drives will still be introduced at a premium, but don't expect their prices to stay high for long. And while some experts believe the market will eventually stabilize (perhaps as soon as the end of the year), others feel that the cutthroat price competition is permanent. "Too many players have ruined the price," says Jason Huang, product manager for optical drives at Acer Multimedia and Communications. "And manufacturers need to keep the [sales] momentum to at least cover their fixed costs."

Until prices do stabilize, rough times are ahead for manufacturers. Some of the smaller players may not survive, notes IDC's Schlichting.

In the meantime, you can get a great deal on that CD-RW drive you've been eyeing.