China to Launch its Own Next-Gen HD DVD Format (ADR: SNE)

Includes: MC-OLD, SNE
by: Steven Towns

China announced plans last Friday to launch its own next generation HD DVD format. This spices up the DVD format war, which to-date has been between the two camps supporting either Sony's (ticker: SNE) Blu-ray standard or Toshiba's (ticker: TOSBF.PK) HD DVD format. This will be the second time China has attempted to develop its own format. The first time, the technology reportedly was "deemed DOA before it was released." Summary of the announcement:

• The new format will be based on but incompatible with HD DVD
• The planned release of the new Chinese format isn’t until 2008
• HD DVD players (the standard created by Toshiba) should hit market Q4’05
• Blu-ray drives and media for PCs will hit market in spring ‘06
-- Sony’s PlayStation 3
-- Matsushita/Panasonic's notebook and desktop PC drives (ticker: MC)
• Approx. 70-80% of DVDs are manufactured in China
-- There lies the great incentive for China to develop its own standard and to avoid heavy licensing fees
• Analysts cite the long-time lag between China’s planned standard and current competing standards as reason for concern
• By the time China’s new standard hits market Blu-ray and HD DVD will be at the point of being able to cut prices and will have established customer bases
• The keys for China's success: timeliness to market; media content; affordability; and compatibility

*Note: Toshiba's U.S. traded shares (ticker: TOSBF.PK) are pink sheets and very thinly traded.

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