Ram,
The hot season in China will continue into the middle of Feb.
The Q1, 1999 shall still be quite good. I am hoping DVD will start to
pick up in April (before the May festival) or in July (before
the Mid AUtumn festival). At least this is my
Chinese friends told me the buying pattern in China.
ESS wasn't talking about this in c.c. because the new CFO is quite
conservative; CUBE wasn't talking about this because they may not
be so keenly aware of it.
Steve
Licensing Issues May Derail DVD Market In China
(02/01/99, 2:33 p.m. ET)
By Sunray Liu, EE Times
BEIJING -- With the DVD market widely seen as
poised to skyrocket this year, Chinese developers
gathered here recently with Hollywood executives and
PC companies to promote cooperation and to resolve
lingering concerns over licensing.
Despite growing expectations, however, a Chinese
government official warned that failure to reach a
compromise with DVD developers on the licensing
issue might prompt China to develop its own new
digital-video format. The warning echoes earlier
statements from other Chinese officials, who said the
nation will aggressively develop its own patent portfolio in
an effort to bolster its technology industry.
The China Audio Industry Association (CAIA), China
Audio and Video Association, and the Optical Memory
National Engineering Center hosted the international
DVD symposium, along with seven government agencies
representing four different ministries. Among those
attending were representatives of some of China's more
than 30 DVD-player manufacturers. Local hardware and
software suppliers met with top overseas manufacturers
such as Hitachi, IBM, Intel, JVC, Panasonic, Philips,
Pioneer, Sony, Time Warner, and Toshiba.
Also present were representatives of the
Washington-based Motion Picture Association of
America (MPAA). It has been reluctant to enter the
China market until intellectual-property issues such as the
widespread piracy of Western films are resolved.
Experts here said they estimated as many as 300,000
DVD players were sold in China in 1998, and forecast
1999 sales totaling 1 million players. Meanwhile, Chinese
OEMs are expected to begin cranking out tens of
millions of DVDs as the Chinese domestic market swells
to as many as 10 million players over the next several
years.
If, as expected, player prices drop to $250 by year's end,
Chinese DVD manufacturers said the market here will
mushroom. One reason such a price drop is anticipated is
costly DVD-ROM drives will be produced more cheaply
by Chinese manufacturers under licensing deals with
Japanese companies.
Chen Wei-rong, director general manager of
manufacturer Konka Group, in Shenzhen, China, said in
an interview that 3 million DVD players will be made in
China this year.
Local Body
At the meeting, China's 33 DVD manufacturers and
research institutes announced formation of an Optical
Disk (DVD) Promotion Committee, set up as a
subsidiary of the CAIA to boost the local industry's
research, manufacturing, and marketing efforts.
Observers said the group's first challenge will be tackling
the intellectual-property rights issue. Chinese DVD
makers are trying to join the DVD Forum, an industry
group of manufacturers and software developers, to gain
access to members' patented technologies and logo
licenses. But Chinese vendors have balked at the
licensing fees.
Experts said those fees can run up to $20 or more for
DVD players -- a significant number if the machines' unit
prices drop to about $250 in China. That fee includes the
logo and format royalties for the DVD Forum.
Separately, DVD manufacturers are also expected to
pay royalties on MPEG-2 video to the MPEG Licensing
Agency and on Dolby Digital to Dolby Labs, in addition
to some intellectual property related to disks themselves.
Even DVD manufacturers outside China are complaining
that this is getting too expensive.
Manufacturers here fear the expense will be prohibitive
once DVD-player production ramps up. Meanwhile, to
date, despite a series of negotiations with China in the
past few years, no members of the VideoCD Forum --
composed of Philips, Sony, Matsushita, and JVC -- have
ever succeeded in collecting any royalties for millions of
VCD players or Super VCD players made and sold in
China.
Chinese manufacturers complained about the fees to
government agencies and industry associations, including
the powerful Ministry of Information Industry and CAIA.
Government and industry officials are now pressing
license holders to eventually reduce their fees.
"Our DVD facilities respect [intellectual-property rights]
and are sincerely prepared to cooperate with all license
holders, but we hope license holders will charge them
[less]," said Bai Weimin of the ministry's Department of
Electronic and IT Products.
Separate Spec?
If not, Bai warned, Chinese manufacturers could use the
millions of dollars they would otherwise pay for overseas
licensing to "develop a separate system or spec besides
DVD," just as they did with Chinese Video CDs and the
current Super VCDs.
Hollywood studios used the international forum as a
starting point for marketing activities in China. "The
enthusiasm of the content providers, the hardware
industry, and the consumer for DVD has brought us all to
China," said Michael Connors, MPAA's vice president
for the Asian-Pacific region. "Among the members of
[MPAA], there is a high degree of energy and
excitement for DVD in China."
The group represents most of the major Hollywood
studios, including Paramount, Universal,
Metro-Goldwyn-Mayer, Warner Bros., Columbia Tristar,
Twentieth-Century Fox, and Buena Vista International.
Warner Bros., the first U.S. studio to establish a Chinese
publishing house to distribute videos, has released more
than 60 VCD titles in China. It plans to begin distributing
films in the DVD format this summer, said Marsha King,
of Warner Home Video.
-- Junko Yoshida contributed to this story. |
