When China's export of DVD players to the U.S. and Europe markets totaled more than 10 million in 2001, a group of different DVD (Digital Video Disc) technology holders fumed, collectively starting a battle to force Chinese manufacturers to pay royalties. As they argued, Chinese manufacturers have been ducking the fee of proprietary technologies and therefore would be able to drive a DVD player's price to as low as $70 at retail. Though the consumers benefit from cheap goods, multinationals like Sony, Philips and AOL Time Warner (who hold patents on DVD format), and laboratories like Dolby Laboratory and MPEG-LA (who hold patents on Dolby Digital Audio and MPEG-2 Video) claim to be the victims.

The group so far has won on several fronts, cutting deals with Chinese manufacturers to pay $15 to $20 per DVD player sold abroad. While it will possibly drive Chinese manufacturers, who live on thin profit margins of $5 to $10 per machine, out of business, China is quickly learning the importance of intellectual property. Many Chinese manufacturers realized that, in the food chain of DVD and its related industry, being specialized in only manufacturing is too vulnerable. In a crucial move, 10 major Chinese underdogs teamed up with several Taiwanese "comrades" to put otherwise scarce R & D resources together and try to develop their own new weapon - EVD (Enhanced Versatile Disc).

EVD technology, the so-called red-laser technology, is a next generation DVD standard based on an assumption of future HD-DVD format (High Definition). It will allow China to add at least a few patents and balance the royalty payments in the future. While China is keen to add HD on a red laser, the group of current proprietary DVD format owners formed a consortium of nine multinationals, led by Philips, JVC and Sony. They are developing a "blue laser" as a combat force. The "blue laser" is scheduled to debut in 2004. Some industry analysts say that the battle between red and blue is indeed a battle of who will own the next DVD format. Apparently, the red camp is inferior in both capital and technology. Its sole advantage maybe the vast market potential inside China, which saw sales of DVD players reaching 26 million in 2001. U.S. and Europe are the two biggest markets of DVD players so far. If Chinese can launch a mature EVD product before 2004 and effectively grab homeland market, analysts say, it will add advantage to the red camp. The fight not only engages these two camps, it also depends on the content: whether Hollywood is concerned with potential HD piracy and which side will it take. With so many uncertainties, we are sure to see more wrestling.