DVD player profits down to $1
 

August 9, 2004, 1:46 PM PDT
CNET News.com

The revolution in consumer electronics that was supposed to make everyone rich apparently isn't.

Commoditization is hitting China's DVD player manufacturers hard, according to researcher iSuppli. Between January and May, the average selling price of a DVD player exported out of the Guangdong province came to $40.80, leaving just about $1 in profit margins for the manufacturers.

The province accounts for 84.2 percent of China's exports of DVD players and exported 34.5 million of the players during the January to May period.

China is no slouch when it comes to making DVD players. More than 80 percent of the chipsets for making DVD players that got produced worldwide in the first half of the year were shipped to China, where they were incorporated into DVD players that will eventually get sold under a wide variety of brand names.

"Without possessing core technologies, these DVD player manufacturers can earn only limited processing and assembly fees, and they must pay royalty fees to the holders of intellectual property," analyst Byron Wu wrote in a report Monday. "The best scenario for the DVD player sector is an acceleration of the consolidation process, with larger firms taking over smaller shops."

Thirty Chinese DVD player makers declared bankruptcy in the first half of the year, Wu noted.

Technology products typically endure steep price declines as popularity grows because of the pervasiveness of standardization. The declines in DVD player prices, however, have been particularly severe, analysts have noted. Despite the difficulty of the market, it has paved the way for the emergence of companies such as Apex.

DVD players have also served as a vehicle for Chinese manufacturers, which traditionally serve as contract manufacturers, to sell products under their own brand names in Europe and North America.

Some manufacturers, including Jiangsu Shinco Electronic Group, have diversified into slightly higher-margin categories, such as portable DVD players.

Despite the difficulty in eking out a profit, the popularity of players remains unabated. Shipments in 2004 should increase to 110 million units, according to Wu, up from 90 million in 2003.

This isn't news, really. It's the standard thing. XBOX and PS2 have VERY slim profit margins, if any. It's always the MEDIA that has the biggest profit margin.

Yeah, but while those companies may make money off game licensing there is no such mechanism for dvd player hardware manufacturers. A Generic Chinese DVD Player Company, Inc. doesn't make any extra money each time a dvd is sold.

The manufacturers' situation is a classic example of too many companies rushing into a market.

its their fault for making trash, and its the public's fault for believing that its a good player.

you dont see companies like denon, pioneer, and others going out of business. they make actual quality products, unlike the cheap chinese players.

I was in China late last year and my colleague bought a Chinese DVD player for around $50. We weren't expecting much for that price but were stunned when we got it back to the hotel and played with it. It had almost all the bells and whistles you could ask for in a DVD player -- many more features in fact than my nice Panny player back home. And the quality wasn't bad either. And all for $50!

Mind you, the Chinese remote and setup menus took a little bit of getting used to. :)

Out of curiosity, we opened it up and had a quick look around. We just shook our heads. We wouldn't even know where to begin to build this thing and bring it to market for $50 retail.