Audio Video News

Taiwanese and Chinese electronics makers hope to save billions in royalty fees by developing proprietary optical disc formats for the Chinese region, according to reports from Taipei in late May.

Seeking to avoid paying royalties to American, Japanese, and European companies for DVD technology, the "Advanced Versatile Disc" (AVD) format was formulated in 2001 by mainland Chinese manufacturers. Now a group of Taiwanese manufacturers has announced the development of a video optical disc technology they are calling "Enhanced Versatile Disc" (EVD), said to be compatible with the Chinese AVD, but "not based on the DVD format." It too would allow manufacturers to avoid royalty payments to patent holders.

Royalties paid to companies such as Sony, Philips, Pioneer, Hitachi, and JVC add $15–20 per unit to the cost of manufacturing DVD players, an enormous sum, considering that some entry-level Chinese-made DVD players sell at retail in the US for under $75. Chinese manufacturers have balked at the fees, and have been in protracted discussions about reducing them with representatives of the "DVD6C" licensing group, (Hitachi, Matsushita, Mitsubishi, Toshiba, JVC, and AOL Time Warner), who earlier this month attempted to placate the Chinese with the offer of a reduced rate of $4 per unit, following a royalty-free remainder of the year for all units built for the Chinese domestic market.

Chinese manufacturers have until June 30 to sign on with that plan. They are also engaged in royalty discussions with the so-called "3C"—Sony, Philips, and Pioneer. Among other license-issuing organizations seeking payments are the Motion Picture Engineering Group Licensing Authority (MPEG LA), developer of the widely used MPEG-2 video compression scheme, and San Francisco-based Dolby Laboratories, whose surround-sound decoder is ubiquitous in DVD players.

In February, the European Union held shipments of 10,000 Chinese-made DVD players because of complaints of royalty non-payment by the 3C group. Earlier this year, Sony Corporation won a US lawsuit against Apex Digital, which is now paying royalties. Mainland China-based Apex reportedly owns more than 30% of the American market share in DVD players.

Should AVD/EVD development efforts succeed—and licensing discussions fail—AVD/EVD could become the de facto optical disc standard for "Greater China," including Taiwan, Hong Kong and Macau. Greater China is home to approximately 17% of the world's population. The "Video CD" (VCD) a format not known in the US, is extremely popular there. Chinese and Taiwanese engineers are also reportedly making progress on a red laser-based high definition optical disc format.