Dated Dec. 11, South China Morning Post. VCD, Super VCD, DVD.......................................
Multimedia
Popularity of disc players catches market off guard
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Backstreet bargains: shoppers buy pirated video compact discs on a Beijing street. Copyright infringements are widespread. Reuters photo
HELEN JOHNSTONE
Not even the Tamagotchi has taken off as fast as the video compact disc (VCD) among mainland consumers. From early last year, when the VCD virtually was unknown, it has become a standard household appliance for many families.
It is a staple of wedding lists all over the mainland and shops selling players and discs have appeared in every city.
"There was no way you could predict the market was going to be so large," says a spokesman for Sony's VCD and DVD operations in China.
The speed at which VCD players found their way into Chinese homes surprised manufacturers.
When VCD players first appeared at prices of between 4,000 yuan (about HK$3,720) and 5,000 yuan, many expected they would be beyond the budget of most households.
However, with high savings rates on the mainland, hundreds of thousands of families decided the sum was reasonable for an appliance that lets them satisfy their passion for watching movies and singing karaoke.
Furthermore, prices for video CD players have dropped to about 1,000 yuan or, as a Philips official told Electronic Engineering Times, about "the cost of a pig".
Ten million VCD players probably will be sold this year, according to estimates from the Ministry of Electronics Industry (MEI).
From 69,000 in 1995, the number of VCD players sold leapt to 2.69 million last year.
Many foreign companies believe the figures are higher, estimating that 17 million households now own a VCD player.
Mainland manufacturers hold more than 90 per cent of the market as foreign makers of VCD players, fighting high import taxes and the additional transport costs, cannot seem to compete.
Sony, one of the first foreign companies to attempt to break into the mainland, says it has a tiny percentage of the market, possibly less than 1 per cent.
"No Japanese or even Taiwanese vendor can compete with Chinese manufacturers any longer in cost-effective video-CD-player production," Billy Yung, group managing director of Shell Electric (Holdings), a Hong Kong-based maker of VCD players, said.
The speed with which manufacturers met demand also has been startling. The International Federation of Phonographic Industry said that in January last year there was just one manufacturer in the mainland.
By April of last year, 22 were in operation. By the end of the year, there were more than 200.
Now, more than 500 are turning out players which differ little in quality from Japanese brands.
"The quality is getting better," says Rick Lei, general manager of consumer products, at Acer.
Many of the components are imported from international manufacturers, such as Acer, and assembled with low-cost labour.
Many expect a shake out in the industry as competition heats up.
Already, China Daily estimates that just 12 manufacturers hold 86 per cent of the market.
A price war, which saw the cost of a player fall to about 2,000 yuan by the end of 1996, has continued.
Idall, one of China's top manufacturers, cut prices by 25 to 30 per cent and doubled its production.
It is not only price-cutting that has caused such rapid growth. A latent demand has made the VCD a purchase on which people were ready to spend their savings.
VHS tapes and players offered in the mainland markets were of such low quality that sales failed to take off. The VCD offers a much higher quality option - and with the added bonus of being able to play karaoke discs.
Music and films also are widely available, thanks to the huge black market of pirated CDs and VCDs.
Only about 15 foreign films make it through censors to an official theatre release each year, but far more appear on VCD illegally.
Foreigners living in Shanghai say virtually any Hollywood release can be found on VCD - and at low prices. The pirated discs can be found for about 30 yuan, with some as low as 10 to 15 yuan.
The VCD also is becoming an outlet for video porn.
Signs advertising VCDs - particularly those away from the main thoroughfares - frequently show busty, bikini-clad women.
The success of Chinese manufacturers has stirred the government to take a more active role.
The MEI, through the China National Standardisation of Technology Committee on Recording, has developed standards for a new format, called VCD 3.0.
An upgrade on the existing international standard, video CD 2.0, VCD 3.0 breaks from internationally recognised standards.
At the same time, Philips has proposed its own format for the mainland, called Super VCD.
Manufacturers, however, are confident the issue will be resolved shortly.
"Around the middle of next year, we will know which will dominate," says Acer's Mr Lei.
The move may be a sign of what is to come as the market moves towards DVD technology.
The Electronic Engineering Times reported in November that the MEI and Ministry of Posts and Telecommunications are considering their own standard on PCs, digital cameras, laser disc players, digital VCRs, digital audio tape and digital versatile disc (DVD).
The newspaper quoted the director for the China National Standardisation of Technology Committee on Recording, Chang Fongchow, as saying it would "develop standards for all electronic consumer goods and components".
The move, which will build a base of intellectual property for the mainland, also may have the effect of keeping foreign imports out.
If Beijing insists importers conform to standards that differ widely from what is internationally accepted, foreign manufacturers will face considerable costs in retooling their products.
The timing is interesting. The mainland is negotiating with the Asia-Pacific Economic Co-operation forum and the World Trade Organisation to remove tax and tariff barriers over the coming years.
With IT tariffs set to fall, mainland manufacturers will face stiff competition.
Sales of DVD players probably will be held back by their high cost, with most foreign manufacturers pricing players about US$500.
The components mainland manufacturers will need to import also are expensive, and the software, at 150 to 180 yuan is beyond most consumers' budgets.
None of the US film studios have licensed films in DVD format for the mainland, nor is the quality of DVDs, which offer higher resolution images than VCDs, much of an incentive for buyers.
"It does not make much sense to have DVD," says Acer's Mr Lei. "If your TV is not high resolution, why do you need a high-resolution player?"
However, this huge market may surprise the industry yet again.
The Jiankui Group claims to have developed the country's first DVD player, vowing it would have the first models in shops at a price of only 3,000 yuan.
A joint venture between Singapore-listed Thakral Corp and Platinum Direct Investments is preparing to produce DVD discs for Hong Kong and China, with the first releases due out early next year.
DOT Media says it has the rights to 35 titles from China Star and the DVD of the recent movie, Jackie Chan - My Story, which will be sold as a bundle with the Thakral players.
Bethal Thakral, managing director of Thakral Corp, says he received a warm response from hardware manufacturers and studios when he began talking about the idea of DOT Media.
"There are not too many people doing DVD software," he says.
He estimates there will be at least a million DVD sets in China by the end of 1998 and 8 to 10 million by 2000. |
