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Technology Stocks : C-Cube -- Ignore unavailable to you. Want to Upgrade?

To: CPAMarty who wrote (32717)	4/25/1998 12:33:00 PM
From: John Rieman	Respond to of 50808

Super VCD hits the streets in September. All C-Cube and 5M units in the 1st year................................................ ijumpstart.com -------------------------------------------------------------------------------- CHINESE SUPER VCD - A THREAT TO DVD? News was seeping out last week of a crucial meeting in Europe, led by Philips to cement yet another standard that will create a near-DVD platform at a fraction of the cost. Back in December Inside Multimedia was the first to reveal details of the Super VCD or VCD 3.0 (IM 157). We now bring fresh revelations that could disturb many of the cosy predictions for DVD. The Chinese are planning to introduce a new standard using MPEG-2 that would yield near-DVD quality at a fraction of the price. A consortium of manufacturers is understood to be ecstatic at the thought of meeting demand for a $200 player selling as many as 5 million in the first year. The story starts with the humble Video CD (VCD) player, which has taken root in China and is still growing strongly. The reasons for its success have been well documented in these pages. They are: the Chinese love of karaoke; lack of an installed base of audio CD or VCR; poor quality of Chinese television. Starting in the rich urban areas but now permeating into the vast rural areas, VCD has taken China by storm. There are around 25m players, of which 17-20m were bought in 1997. The VCD industry expects to sell 25m this year alone. The problem is that the price has collapsed to as little as 600 RNB (around Pounds 50) and competition from local manufacturers is deadly. In addition, the price of titles has collapsed. Many shops outside the cities are renting discs for as little as 25p per day. This situation is stirring Philips, Sony, Panasonic and JVC to develop a successor to VCD that could give them a price premium in an exploding market. The plan is to introduce a Super VCD player, costing around $200, that would use existing replication technology but would yield near-DVD quality. Sounds impo ssible? Not really. Given that the average Chinese TV has only 300 lines, the decision was made to go for 'half D1' resolution of 350 lines, with four audio channels and overlaid graphics for subtitling and karaoke. MPEG-2, variable bit rate encoded, will give a maximum of 2.5 Mbit/s and an average of 1.8 Mbit/s. Thanks to VBR, the resolution is much higher than MPEG-1 video at 1.5 Mbit/s. The result is a Super VCD player that can deliver much higher quality video and sound, but can still play existing VCD titles. But hold on. How can you cram a movie onto what is still an ordinary 72 minute CD? The answer is you can't. The Chinese have been very cunning and have recognised the cheapness and popularity of the 3-disc carousel. You drop in a bit of extra buffer memory and you get seamless jump from disc to disc. Thus films will come as 2- or 3-disc sets. C-Cube stands to make some serious money, as it will be the first to supply the MPEG-2 decoder chips (the company has around 70 per cent of the VCD chip market). But competitors like ESS are not far behind. Encoding will be provided by CeQuadrant, using encoding stations at Minerva, which has five installations in Hong Kong. Nothing happens in China unless the government backs it. Why is it pursuing this policy of a Chinese-only standard? The Chinese believe that DVD is not a true international standard like audio CD. They object to the regional encoding and are particularly offended that they are regional code 6 - effectively blocking them off from the rest of the world. They also point to the fact that Hong Kong is region 3. They naturally wonder how one country can possess two regional codes. China has been making valiant efforts to clamp down on piracy, with the help of sensible pricing strategies from the West.. Warner, for example, is licensing the sale of legit discs which sell at the equivalent of only Pounds 5. It's all back catalogue stuff and Warner gets around Pounds 1 from the sale. Not bad when you have a market of 1.2 billion people. IM analysis Encouraging a separate China-only standard has many attractions for the Chinese. It gives them control over piracy, not to mention smut and, dare one say it, seditious Western ideas. OK, it drives a hole through so-called international standards. But who cares? Sony and Philips have been doing that for the last two years, since they stopped the pretense of loving international standards because they were good for the world. What are the implications for the West of this new non-DVD DVD player? Well, apart from expatriate communities in places like London, Vancouver and Singapore there is not much chance of the players seeping into the West. There is, however, a major opportunity for Western publishers to enter the market with localised Chinese titles. Sony, Philips, Panasonic and JVC are in the final throes of ratifying the new standard with the Chinese government. If all goes well the new players could start hitting the streets in September. With market projections of 5 million sold in the first year it puts the prospects for DVD-Video into perspective, doesn't it?