The Register is reporting that a couple Chinese DVD manufacturers are suing the DVD patent holding group over their patent licensing fees, claiming that the way they’re managed is a violation of antitrust law. The original article in CHINAdaily says that Chinese manufacturers are being charged $20 per player for patent fees, which is up to 20-30% of their production costs. The suit claims that this is unfair, because US DVD manufacturers are only charged 2-3%.
I have no idea what to make of this. On one hand, I’ve seen $17 DVD players before, and you can’t tell me that it actually cost $60-80 to produce. Even if the really cheap players are unlicensed (it’s not uncommon for cheap DVD players to simply ignore paying for things like patents and CSS fees), the numbers still don’t make sense, because they suggest that DVD players cost over $40 to produce. Since I can go to Target and pick up several different models of $40 DVD player any day of the week now, you can’t tell me that every sub-$40 DVD player is a loss-leader to get people into the store.
Similarly, the 2-3% number doesn’t work for me. I mean, who builds consumer electronics hardware in the US these days? I’m not a big follower of the CE market, but I’d assume that the only US-based hardware manufacturers are niche players, probably either really high-end stuff (like the $30,000 DVD jukebox that the DVD industry is currently suing) or embedded hardware for places where local management and extreme quality control is more important then cost, like the aviation industry. In either case, an average selling price of $600 would turn a $20 licensing fee into 3%.
So, I’m not really sure how the Chinese manufacturers can claim discrimination.
On the other hand, I’m not a big fan of intellectual property licensing groups, and I’m even less a fan of DRM groups, like the DVD Copy Control Association. Since this lawsuit has the ability to make major changes in the way that these two businesses work. On the other hand, pretty much every industry association out there works in the same manner, and I’m rather fond of things like DDR SDRAM and standardized flash memory cards–it’d be a shame to invalidate all of them at the same time.
On yet another hand, if the DVD patent group loses some of their DVD patent licensing rights, it’ll probably just make the patent holders move on the next-generation optical disk standard (either HD-DVD or Blu-Ray) even faster. Assuming that they can find a way to structure the licensing rights in a manner that won’t have the same problems as the DVD patents, they’d have an enormous incentive to push HD video disks onto the market as fast as possible. It’d also drive a bit of a wedge in between the CE hardware manufacturers and the content people (like Disney), because the CE people would want HD to completely supplant DVD as quickly as possible, and this wouldn’t play well with the content side’s perpetual fear of high-quality digital releases of their works.