According to Screen Digest, China still has some major obstacles to tackle if it is to realise its potential and become the world's largest retail video market. In 2004 the USA lead the way generating $15.7 bln in revenues for its distributors. Despite a vast population, a stable economy and government commitment to economic liberalisation, China is still languishing at seventh place in the top 10 global vid eo markets for 2004.
Piracy has been a major obstacle to growth in the Chinese video market over recent years. One Hollywood major has recently announced a two-pronged release strategy which it hopes will make legitimate DVDs more attractive to Chinese consumers. Firstly it will sell new DVD titles at a heavily reduced price, closer to that charged by the pirates and secondly it will release titles soon after their US release dates. The success or failure of these tactics will have a significant bearing on China's ability to fulfil its potential.
Other threats to growth include disputes over DVD royalty payments and the potential for a new standards war as next generation DVD technologies emerge. China's Ministry of Information recently announced that the home grown next generation format Enhanced Versatile Disc (EVD), has been officially selected as the national standard for the electronics industry. Future growth will depend both on the success of next generation formats such as EVD, which has quickly gained the support of China's consumer electronics manufacturers, and on China's dedication to winning the war on piracy. In 2004 total spending on legitimate video software fell by almost 12% to 8.2 bln yuan ($994 mln). These recent figures for total spending on the video software market suggest that there is some way to go before China is able to reap the benefits seen elsewhere.