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China Is Challenging DVD Format With EVD

The new disk may allow Chinese companies to avoid paying licensing fees to patent holders.

November 19, 2003|From Associated Press

Seeking to compete on its own terms in the lucrative entertainment industry, China announced a government-funded project Tuesday to promote an alternative to DVDs and "attack the market share" of the global video format.

The rollout of the long-planned project, known as EVD, or enhanced versatile disk, was timed to coincide with the beginning of what China calls the "golden sales" period -- known elsewhere as the Christmas shopping season.

EVD would give Chinese manufacturers and technology consortiums a home-grown platform to sell and build on. It also is aimed at relieving Chinese DVD producers from paying licensing fees to the companies that hold patents to the DVD format.

It was not immediately clear if any elements of EVD would help China battle the intellectual-property theft it has been promising to eradicate since joining the World Trade Organization in 2001. Pirated Hollywood movies on DVD are still everyday sights on the streets of Chinese cities.

Nor did the Chinese government say whether it had contacted major film producers about eventually releasing their films and other productions on EVD. That would be a pivotal factor in any new format's success.

A spokesman for the Motion Picture Assn. of America did not immediately return a message seeking comment.

Development of the new, high-definition compression format has been sponsored by China's State Trade and Economic Commission and its Ministry of Information Industry, two powerhouses in the country's efforts toward high-speed economic and technological growth.

Research on EVD began in 1999. It was developed by Beijing E-World Technology Co. using video-compression technologies licensed by Clifton Park, N.J.-based On2 Technologies Inc.

Shares of On2 slipped 1 cent to $1.84 Tuesday on the American Stock Exchange.

Because large parts of China's economy are still controlled by the state, it is in a better position than most countries to ensure such new technology will take hold in the domestic market.

More uncertain is the international market, which has moved toward DVDs as the standard.

On the surface, it would seem that EVD's international effect could be huge, because China makes about 60% of the world's DVD players, said Vamsi Sistla, senior analyst with Allied Business Intelligence, an Oyster Bay, N.Y.-based research firm.

But there is no guarantee that standards bodies and Hollywood will endorse EVD, meaning that EVD machines also will need to play DVDs -- thereby forcing Chinese manufacturers to keep paying DVD royalties, Sistla said.

Also, while EVD is designed to be better than DVD at recording and showing finer-quality images for high-definition TVs, the HDTV market remains small -- and already is the focus of competing standards, such as Blu-Ray and HD DVD-9, developed by leading electronics companies in Japan, South Korea and Europe.

In China, though DVD is the upper-end standard, many people still use VCDs, or video compact discs, a differently coded format. VCDs never caught on in the U.S., where a shift from VHS videocassettes to DVDs has been underway for several years.

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