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Asia-Pacific Poised for DVD

7 Feb, 2003 By: Jessica Wolf

Japan trails behind only the United States and the United Kingdom as the third-most-robust video market in the world, especially regarding DVD adoption. Other parts of the Asia-Pacific region lag behind in DVD, still clinging to the video compact disc (VCD), but that is expected to change.

A new study released last week by audiovisual media analyst Screen Digest suggests lesser-DVD-centric areas of Asia-Pacific, like China, South Korea and the Philippines, will make great strides to catch up in the next four years, and it estimates a fivefold increase in DVD hardware adoption by 2006. The report also predicts the Asia-Pacific video market will hit $12.1 billion by 2006 and DVD will make up 70 percent of consumer spending, compared with 30 percent in 2002.

Though, as in the United States, DVD is quickly emerging as the format of choice in Japan, Australia and New Zealand, VCD has been the VHS alternative of choice in many of the smaller markets of the Asia-Pacific region. VHS deteriorates faster in most of the region's climates, making a digital option even more attractive. VCD's adoption rate and popularity stems from the fact that it's less expensive than DVD technology, and there is a breadth of cheap VCD players and software product -- though much is pirated -- readily available, according to Screen Digest.

But Screen Digest senior home entertainment analyst Helen Davis Jayalath said the less mature video markets of the Asia-Pacific are already in line with increasing DVD adoption, and that's likely to become even truer in the next few years.

“Our forecasts indicate that by the end of 2006, 139 million Asia-Pacific homes will have a DVD-Video player or recorder -- more than five times as many at the end of 2002 and almost 20 percent of all TV households in the region,” Jayalath said.

The Screen Digest report predicts DVD software consumer spending will increase 165 percent by 2006, up to an estimated $8.2 billion. Screen Digest attributes the increase in part to the anticipated 16 percent drop in the average retail price of DVD software. The increased DVD spending should boost the entire video market by 40 percent in 2006, the report predicts.

That's not to say VCD will simply disappear, according to Screen Digest, though it predicts DVD will ultimately replace both VHS and VCD. The lack of copy protection on VCD will keep these discs in the market at inexpensive prices, which will force down DVD pricing. DVD also offers a digital mastering opportunity for VCD pirates, which will improve the quality of counterfeit product. How fast DVD takes over depends a lot on how quickly software and hardware prices drop in each region and on antipiracy measures, according to Screen Digest.

Asia-Pacific regions that will be of particular interest for Hollywood suppliers in the next few years include India, South Korea and the Philippines. According to the report, supplier revenue from India should increase by nearly 130 percent between 2001 and 2006, and by 75 percent each in South Korea and the Philippines.

The massive Japanese market will keep DVD dominant in the Asia-Pacific region, said report author David Scott.

In 2001, Japan had the highest spending on video per equipped household, with $619 million in combined VHS and DVD sales and rentals.

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