JULY 28, 2008 • The HD-TV format may be officially dead, but that hasn’t stopped Shanghai United Optical Disc from establishing its first production line for China Blue High-Definition Disc (CBHD), an off-shoot of HD-DVD. The primary difference in formats is that CBHD will use different video compression and copy protection. The company will begin volume production of CBHD drives during the fourth quarter. Royalty fees per CBHD player produced are expected to be in the $8 range.

Impact: What sells in the Chinese market is taking on added importance. For example, GM sells more Buicks in China than it sells in the U.S. The price of Blu-ray players in the West may be reaching mass market levels, but what the average Chinese consumer can pay is still significantly less. This was a market where cheap Video CDs thrived for years as the platform for pirated feature films.  The same could happen with CBHD if the Chinese government turns a blind eye to knock-offs. If CBHD can take off in China as the HD option for most Chinese consumers, it won’t mean much for Europe, Japan or North America. But the developing world might be a different story, where demographics will more closely mirror China’s. That could have serious implications for how far Blu-ray can expand worldwide. In addition, one day we might see a Chinese video game console for the developing world. If so, CBHD would have an inside track for inclusion on such a platform.