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China STB makers decry stiff MPEG-2 royalties

Posted: 01 May 2007 ?? ?Print Version ?Bookmark and Share

Keywords:digital STB maker on MPEG-2 royalties? MPEG-2 royalties in China? growing digital terrestrial and cable TV market?

Digital STB makers in China are on a collision course with MPEG-2 patent owners over unpaid royalties, setting the stage for what will likely be intense haggling in the coming months.

As these STB makers ramp up production, the MPEG Licensing Agency (LA) demands that they either pay $2.50 per STB or face legal action. China companies are cringing at that number, saying it will wipe out most of their profit. They are countering with offers as low as 30 cents per box.

MPEG LA isn't in the mood to bargain. "We do not make concessions to one part of the world vs. another, especially because products find themselves all over the world and coming from all kinds of places," said Larry Horn, president of MPEG LA.

Although the license fee is non-negotiable, MPEG LA has wiggle room on the payment terms for money already owed, Horn said. He could not say when a resolution might be reached.

High stakes
The stakes are high. China is not only a major exporter of digital STBs, but it is also one of the fastest-growing markets for digital terrestrial and cable TV. ABI Research released a report predicting China will be a leader in shipments, cranking out 75 million digital cable and 9 million IPTV boxes by 2012.

"The Asia-Pacific pay-TV industry still has considerable room for growth, especially in countries like China and India, where the base of potential customers is huge, but there is still relatively low pay-TV and digital penetration," wrote Serene Fong, ABI's broadband research analyst.

Fong believes that China will also be a leader in subscriber growth rates. Growing affluence in cities such as Shanghai and Hangzhou is leading consumers to spend more on TV and video services. Consumers are also eyeing technologically advanced STBs for viewing digital broadcasts over traditional analog TV sets and accessing interactive services.

Fast-growing market
China's digital cable market is already nearing 13 million subscribers. "We think that the market will probably double this year," said Bob Krysiak, president of Greater China for STMicroelectronics.

Broadcasts usually use MPEG-2 technology. High-definition broadcasting isn't popular in China, so MPEG-4/H.264 isn't widely deployed.

China system manufacturers have long resisted the power of licensing agencies like MPEG LA, a consortium of patent holders such as Apple Computer Inc. and Sun Microsystems Inc. that charge a royalty of $2.50 per system.

"Since China companies used their technology in STBs, it's reasonable for the MPEG-2 organization to charge the fee, although they charge too much," said Bai Huang, a manager in the digital networking unit of Konka, one of China's top CE makers. Konka only recently signed a license, according to MPEG LA.

MPEG LA and patent holders have had trouble collecting royalties from China makers of DVD players, which claim the combined fees of $15 to $20 per system are too high. That tussle dragged on for years, fanning the flames of discontent in China over its reliance on foreign technology. It also became a catalyst to accelerate local standards development.

- Mike Clendenin
EE Times

Cai Yan in Shanghai contributed to this story.

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