Why China is the Make or Break Market for the Digital Home

In the Hutong
Going through my latest Amazon order
1454 hrs.

Ron Enderle of ECT news did his year-ender piece “The Three Big Tech Battles of 2007,” informing us that the big battles this year will be for our the digital home, our pockets, and our laps. No rocket science, there, but I give him credit for filing the story at 0400 on New Year’s Day.

One thing Ron wrote that got me thinking was how the biggest obstacles to digital homes are not the widely varying approaches of the equipment manufacturers, but “the Recording Industry Association of America (RIAA), and the Motion Picture Association of America (MPAA) and the content owners that are so concerned iwth piracy they have almost made it impossible to create a solution that offers an experience that the market will find compelling.”

He’s right, of course, but in contemplating that conundrum my eyes were drawn to a single word in that sentence, repeated twice: “America.”

It would seem, therefore, that if you were a consumer electronics company and you wanted to build your digital home business, you’d go someplace where the RIAA and the MPAA are regarded for what they are – preachy lawyers hiding behind the fig leaf of an antiquated legal system, defending content owners who keep clicking their heels and wishing themselves back in 1985.

In other words, you’d come to China.

Not because China doesn’t have a copyright protection system – the recent judgement handed to Sohu is proof that copyright protection is actually starting to take effect – but because the system has not yet ossified to the point where it will be allowed to obstruct the development of an innovative electronics business.

So if the Digital Home has a chance to make it anywhere, I’d say it’s right here in China. Where else do you have an immense and rapidly growing base of consumers with:

1. A demonstrated preference for in-home and personal entertainment systems;
2. Ready access to a wide variety of recorded content delivered on media without any form of digital rights management;
3. A significant percentage of new home-owners home electronics system purchases;
4. A mobile culture that will support mobile viewing devices;
5. Some of the worst TV and radio options in the northern Hemisphere;
6. Few decent cinemas;
7. Tiny record stores with limited options; and
8. Plenty of time on their hands?

In other words, apart from wealthy college students in the US, China is your market.

So my prediction for 2007 – watch for the digital home wars to come alive in China, driven by the global players and by local companies pushing EVD as part of the solution.