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China taps U.S. partner to keep EVD spec afloat

Posted: 16 Feb 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Mike Clendenin? HD-DVD? Blu-ray? optical-disk? blue-laser disk?

As the HD-DVD and Blu-ray optical-disk formats slug it out for market dominance, China's lesser-known standard is struggling to survive and has made the unlikely move of using an American company's red-laser-based technology to challenge the high capacities of blue-laser disks.

The surprising partnership may be exactly what China's Enhanced Versatile Disc (EVD) standard needs to keep from fading to irrelevancy faster than a straight-to-DVD movie.

"We must secure a higher data capacity because DVD5 or DVD9 is now too small. The red-laser technology will help solve that," said Li Hai, VP of sales and marketing at Beijing E-World, which owns key patents for EVD and its trademark.

For several months now, E-World has worked with New Medium Enterprises Inc., the U.S. developer of another red-laser-disk spec, known as Versatile Multi-Layer Disc (VMD), which can reportedly store as much as 50GB.

In a deal last December that surprised many, including some of E-World's business partners, the caretaker of the Chinese optical-disk standard agreed to sell a large stake in itself to New Medium Enterprises. New Medium will buy a 69 percent stake in E-World for $8.5 million and 40 percent of its shares. The new company will be called NME-World.

The deal is scheduled to close at the end of March, but there is speculation it may not happen. There is some sensitivity regarding the deal because the Chinese government gave E-World about $1.2 million to help develop the EVD spec as a Chinese standard. Eugene Levich, CTO for New Medium Enterprises, acknowledged there may be some "discrepancy among the positions of various shareholders," but added that in his opinion, "it is a done deal."

E-World's Li also said the merger would take place and that a majority of shareholders support it.

EVD emerged about five years ago from a small Chinese company called Davworld Co. Ltd. The spec uses MPEG-2 Main-Profile@High-Level-based advanced encoding and standard red lasers to read high-definition content, which is secured using proprietary encryption. It also uses a proprietary audio technology, EAC 2.0, which supports six-channel audio and is reportedly more efficient than Dolby Digital and DTS, used in DVDs.

Royalty burden
The spec gained momentum a few years ago when Chinese DVD-player makers saw prices plummet as royalty payments to foreign companies remained roughly the same, biting deeply into their thin margins. They saw EVD as a way to shirk those royalties. A group of high-profile Chinese electronics houses, including SVA, Shinco, Amoi and Skyworth, agreed to back the format and form a company called Beijing E-World Technology to shepherd its technical development and handle promotion, with the aim of eventually turning it into an international standard.

But that hasn't happened. After much fanfare, China's EVD has been something akin to a box-office flop. "The volumes of EVD have not materialized to the degree that the government and E-World have projected or what we would have wished for," said Tim Vehling, VP of marketing for LSI Logic Corp.'s Consumer Products Group.

LSI Logic has been shipping its EVD-1 processor, based on its Domino architecture, since 2003. E-World executives had thought they would be selling millions of players a year by now, but only about 200,000 sold in 2004 and about 300,000 to 400,000 in 2005, Li said.

Now, E-World hopes the partnership with New Medium Enterprises will breathe new life into the standard. "It's a challenge to bring a new format to market, but they could still make it, now that they have access to higher capacity," said Bob Krysiak, VP of Greater China for STMicroelectronics. "The standard is as good as any other and it's a low-enough price."

New Medium's technology will help EVD disks pack up to 10 layers that store 5GB each, Levich said. Currently, EVD disks are similar in capacity to DVDs. Read-only DVDs use two layers that store 4.7GB apiece. Blue-laser-based read-only HD-DVDs store a total of 30GB on two layers, and a triple-layer, 45GB disk has been proposed.

Initial targets
So far, New Medium claims to have disks capable of 20GB to 30GB of storage for its high-definition, 1,080i/p players. By the end of the year, it intends to release 40GB disks and introduce samples of recordable media that would be followed by EVD/VMD recorders in the first half of 2007. Initially, target markets will be China and India. This year, said Levich, will see a "huge development in content encryption" for EVD/VMD that will compare to the AACS scheme used by the blue-laser camps. He declined to elaborate until the technology has been fully tested.

Because of VMD's higher capacities, there is no immediate plan to switch from MPEG-2 codecs. Originally, E-World had considered codecs from On2 Technologies and China's homegrown AVS standard. The latter is still a possibility and so is H.264, Li said.

E-World's decision to forgo On2's codecs has led to much acrimony between the companies, with On2 threatening to sue if a settlement isn't reached. "If they want to move ahead with EVD and this merger, our expectation is that they will have to come past us to make sure they have a clean shot at that," said Doug McIntyre, CEO of On2.

Assuming the partnership comes off as planned, a few factors will still hold back EVD. First, the installed base of HDTVs in China is relatively low, so many users don't see the benefits of video saved on EVD disks. Second, although the price tag of EVD players is only around $100, that is still twice the cost of basic DVD players. Third, there are only 300 to 400 titles available, mostly from filmmakers in Hong Kong and elsewhere in China.

Content lacking
The stated goal of EVD has also remained elusive. Because EVD players must be backward-compatible with the popular DVD standard, Chinese system makers are still liable for royalties of about $15 per player. Plus, they may need to pay additional EVD/VMD royalties that amount to a few dollars per player. Li declined to confirm the amount of EVD royalties, saying only that it is relatively low and varies among manufacturers, depending on their shareholding in Beijing E-World.

Ironically, noted one chip industry executive, another factor holding back EVD is the lack of illegal content. "If you could have gotten pirated high-def content from Hollywood, it would have been widely successful. But that doesn't exist. There is very little legitimate content for VCD [a format popular in China] or DVD in China," the source said.

- Mike Clendenin
EE Times

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