Audio Video News

Although electrical systems and broadcasting standards vary from country to country, visionaries have always imagined that one day worldwide technology would adhere to one set of specifications. That may never happen. The electronics industry's hope that the DVD would become a universal format, the video equivalent of the CD, may be scuttled by Chinese manufacturers seeking to avoid paying royalties to the format's designers, according to several stories appearing in industry publications in the wake of the recent Consumer Electronics Show.

Members of the China Audio Industry Association (CAIA) are threatening to build players for the domestic Chinese market utilizing an alternate set of specifications—a move widely viewed as an attempt to avoid paying royalties that can add ten percent or more to the cost of manufacturing DVD players. The alternate, known as Advanced Video Disk (AVD) technology, would become the standard in China, a nation with a population of approximately one billion people. Foreign manufacturers wishing to sell products in China would have to build AVD machines and pay royalties to the CAIA.

The threat of an alternate standard arose after the DVD Forum announced at CES that it had increased pressure on manufacturers to pay their share. High royalties may "drive Chinese manufacturers to give up on the DVD format," said Jin Zhenglong, the CAIA's secretary general. "The unilateral high royalties will be very harmful for the global industry and customers. It sets up a terrible barrier to further negotiation and cooperation."

China has previously established its own standards to avoid paying royalties. The Video CD (popular elsewhere in the world but rarely used in the US) was transformed into a Chinese-market "Super Video CD," allowing Chinese manufacturers to skip payments to VCD developers Sony, Philips, JVC, and Matsushita. There are currently approximately 90 DVD and video CD manufacturers operating in China.

Some observers believe the threat to strike out on their own is a bluff intended by the Chinese electronics industry as a bargaining ploy to negotiate lower payments. Lu Shuh-tai, director of Taiwan's Optical Electronics and Systems Laboratory, said the Chinese government "wants to negotiate with the DVD Forum to see if it can get greater benefits from the royalties." If the threat becomes a reality, an alternate DVD technology could present unforeseen problems for Chinese equipment makers who already enjoy a strong presence in the global market. (The country's largest DVD maker, Jiangshu Hongtu High-Technology Co. Ltd. of Zhenjiang, exported approximately one million DVD players to the US in 2000.) Manufacturers would still need to buy parts from suppliers outside China, and might need to run parallel production lines for AVD and DVD machines, an eventuality that might prove more expensive than simply paying royalties to the DVD Forum.