Odds stacked against Blu-Ray competitor despite cheaper production costs and lower royalties

Volume production of China’s self-developed high-definition optical disc format China Blue High-definition Disc (CBHD) – is to begin in the fourth quarter of 2008.

Shanghai United Optical Disc has completed its first production line and its output is initially expected to sell only in the Chinese market.

Until recently CBHD was known as CH DVD (China High-definition DVD) – the Chinese version of the Toshiba-supported HD DVD format that lost out to Sony-backed Blu-ray last year.

Yet while the costs of setting up a CBHD manufacturing facility and royalty fees to produce players are lower than those for Blu-ray, Taiwanese drive-makers are not optimistic about the format’s prospects.

A report in the Chinese-language enorth.com.cn says that CBHD will find it difficult to compete with Blu-ray Disc (BD) in the Chinese market.

This is despite the costs for refitting a DVD production line to manufacture CBHD discs being only US$800,000 – much lower than the US$3 million needed to set up a BD disc production line.

Royalty fees to produce licensed CBHD players will be about 55 yuan (US$8.10), are also much lower than BD licensing rates.

However, the enorth.com.cn report suggests that these cost advantages will not be sufficient to impact upon BD’s increasing market penetration.

It points out that members of the BD Association have reduced retail prices for their entry-level Chinese-made BD players in the North American market to around US$299 and prices are expected to drop further.

This would leave CBHD players facing challenging price competition once they are launched in the China market.
The reports also notes that CBHD has not won support from leading movie studios in Hollywood and this is expected to render the format at a significant disadvantage in competition with BD.

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