FANTASTIC PLASTIC; FIRM ON THE CUTTING EDGE WITH DIGITAL VERSATILE DISCS.

Byline: Dave McNary Daily News Staff Writer

In a quiet corner of a Valencia industrial park, a 2-year-old company is scrambling to get ready for the next craze in consumer electronics.

Optical Disc Media, which has fewer than a dozen employees, began churning out digital versatile discs three months ago and is currently one of only three plants in the country where DVDs are produced. By the end of the year, the company expects to be shipping 1.2 million discs a month as it doubles its work force.

``We have the confidence and guts to be a pioneer,'' declares Erick Hansen, chairman and chief executive officer of privately held ODM.

For now, DVD offers movie fans a chance to bring into their living rooms sound and video quality far above what has been available from conventional television and videocassette recorders - all on a jazzy machine costing as little as $500, thanks to using essentially the same technology found in compact discs.

DVDs are the same size as CDs but store seven times as much data. Next-generation discs will compress the data to have four times more capacity, which could lead to far more complex computer games and far simpler data retrieval.

``You'll be able to keep the Library of Congress in a shoebox and access anything in it in a nanosecond,'' Hansen said in a recent interview.

ODM plans to add a second shift this week, and Hansen predicts the plant will be shipping 20,000 discs a day by the end of August. He also expects to be the first plant to ship recordable DVD discs early next year.

``We're very lucky to be where we are right now,'' said Hansen, who established Optical Disc Media in July 1995 and has obtained backing from 250 investors, whom he wouldn't name. ``We felt at the time that DVD and optical science would become the standard for data storage in the coming years.''

The factory's equipment, mostly in a single clean room, is worth several million dollars. The technology, which has been in existence for more than a decade, works like this:

Data is stored on clear plastic discs and then ``metalized'' in a chamber with argon gas.

The process creates ``pits'' that contain the data to be read by a laser recorder.

The tracks and pits are far closer together than on a conventional CD.

``This is the most precision manufacturing known to man today,'' Hansen proclaims.

His wife, Sega veteran and ODM Chief Operating Officer Patricia Lewis-Hansen, believes there is a potential for explosive growth. Some of the major movie studios have already agreed to release their movies on DVD (as well as videocassette), and there are plans by many personal computer makers such as Gateway and Compaq to include DVD drives in their machines.

``Right now, we're able to react very nimbly to a wonderful opportunity,'' she said. ``DVD has been kind of an unexpected surprise. I don't think a lot of the industry was expecting this year to be the year for DVD to break out.''

DVD players and discs have sold impressively since they went on sale in March. For $20 to $25, a consumer gets top-quality audio and video plus all the extras that serious fans crave: the trailer, deleted scenes, multiple language tracks, interviews with the director and cast, and running commentary from the director, among others.

But DVD's future is not a slam dunk. Of the six major studios, only Warner Bros., Universal and Sony have backed the technology, while Walt Disney, Paramount and 20th Century Fox remain uncommitted.

Yet the technology is clearly catching on, with 125,000 DVD units shipped as of the Fourth of July weekend, even though the players and discs were only available in seven American cities. Toshiba executives said this week they expect another 625,000 players to be in stores by March.

The key at this point is Disney, which has given no indication of whether it will back DVD, remain on the sidelines or endorse an exotic Zoom technology that would contain a pay-per-view system within the disc. Most analysts believe Disney is simply being cautious and note that if the entertainment giant - with its massive library and powerful marketing expertise in the home video market - comes on board, DVD will become a ``must have'' item.

``Everyone is still waiting to see what Disney is going to do,'' said Derek Bain, an analyst with Paul Kagan and Associates. ``I think there's a lot of consumer excitement about DVD, but if Disney wants to go elsewhere with it than what's been done so far, it will cause confusion.''

Bain said the current customer base is not enough to force the holdouts to make a decision but that they will face mounting pressure, particularly with the recent decision by Warner to launch a nationwide campaign in the fall.

``Once you hit 1 million units, they'll start to feel the pressure,'' Bain said. ``Disney may be thinking it's not a big deal and squeeze the biggest bang for the buck on the royalty issue.''

There may simply be too much money to be made for all the studios not to come on board. Bain expects DVD software sales to start eating away at video sales, now at $9 billion, in another year and to surpass them in 2001. DVD revenues will reach $13 billion annually by 2006, he predicts.

A NEW SPIN ON TECHNOLOGY

The basic single-sided DVD contains 4.7 billion bits of information, which is seven times the capacity of a CD.

DVD also produce 500 lines of resolution on a video screen, compared to 420 lines from a laserdisc and 240 from a standard VHS videotape. Many DVD discs have trailers, deleted scenes, directors' commentary, liner notes, multiple language tracks and the ability to skip to scenes.

More than 100 movies released on DVD since March:

Warner Bros. has been the most active with ``Space Jam,'' ``Twister,'' ``Batman Returns'' and ``Strangers on a Train.'' Warner also handles releases for New Line (``The Mask,'' ``Seven'') and MGM (``Goldeneye,'' ``Rain Man,'' ``The Wizard of Oz'').

Sony has also been active with ``Jerry Maguire,'' ``Jumanji'' and ``Taxi Driver.''

PolyGram (``Fargo'') and Live (``Reservoir Dogs'') have started up, and Universal will start this fall.

Disney, Paramount and Fox remain on the sidelines.

CAPTION(S):

4 Photos, Box

Photo: (1--Color) Polycarbonate is the raw material ODM uses to make DVDs.

(2--Color) Erick Hansen, ODM's chairman and CEO, displays one of the digital versatile discs his company makes.

(3--Color) Service engineer Mike Dixon describes his work using a computer that scans the discs for imperfections at Optical Disc Media.

(4) Hansen talks to Dixon in the clean room at the plant in Valencia. ODM is one of only three companies in the nation making the new discs.

Hans Gutknecht/Daily News

Box: A NEW SPIN ON TECHNOLOGY (See text)