Saturation ownership levels of DVD machines in the US and Western Europe have led to a steady slowing in the rise of DVD sales in recent years. But to talk of DVD as yesterday's technology is to take a narrow perspective.

DVD slowdown is not a global phenomenon. In a number of emerging markets, the penetration of players in households is recreating those early boom years in the West. Nowhere is that more clear than in China.

A Screen Digest report has suggested the scale of potential. The predicted numbers look impressive: last year, the US studios and other distributors sold 70 million DVDs in China, worth $115m. By 2010, that figure will have more than quadrupled to $500m-plus.

The growth is being partly driven by the replacement of VCRs with DVD players, a trend which again mirrors Western patterns.

Equally, China was the fastest growing theatrical region last year, further enhancing DVD sales as a marketing tool.

Chinese box-office revenues will almost double over the next three years, according to another Screen Digest report with Nielsen NRG, from last year's $336m to $720m by 2010. The report predicts an increase in modern, or silver-screen, cinemas from 2,940 in 2005 to 5,000 by 2010.

Factors holding back growth

But perhaps, the most notable aspect of the figures is not the size of the growth but rather how limited it is, given that China has a population of 1.3 billion people. There are two factors behind this relatively restricted performance: rampant piracy and a rather unreliable approach to free markets.

Estimates put Chinese video-piracy rates at 95%; while the combined legitimate market for home entertainment was 126 million units in 2006, Screen Digest research suggests that as many as 2 billion counterfeit discs were in circulation at the same time.

Meanwhile, measures such as the restrictions on foreign investment in exhibition or co-productions demonstrate the problems faced in developing a free market in China. Although China has much to gain from liberalisation.

"While the government is understandably keen to protect the cultural identity of China, market liberalisation will in turn push China's video industry to a more prominent position in the world," says Screen Digest Asia-Pacific analyst David Scott.

"This would give China the opportunity to make full use of the foreign distribution channels set up by multinationals to introduce its products abroad and gradually gain a larger share of the international entertainment business."

The big hope for sustainable exponential rises in DVD sales and indeed the box office within China is social, he suggests.

Specifically, China is witnessing the emergence of an urban class of relatively affluent and technologically advanced consumers who live in China's major cities and can afford the relatively high DVD player prices of $26-$39 (rmb200-rmb300).

Some 55% of this group owned a DVD player by the end of 2006, compared with about 20% across the country as a whole. The number of urban households equipped with a DVD player in China will continue rising to 143 million by 2010, at which point the country will represent more than a quarter of the world's DVD homes.

Such technologies - and theatres themselves - are likely to remain beyond the range of the rural population for some time to come.