Around 126m video disks were sold in China in 2006, but as many as 2bn counterfeit discs were in circulation at the same time.
Understandably, piracy rates of around 95% create a "major challenge" for any company trying to make a profit in China's film and home entertainment market, according to Screen Digest, the London-based media analysis firm.
Major western titles are often available to the Chinese home movie fan a month before their official release, at far less than the relatively high cost of purchasing a legitimate DVD. Pirated copies of the latest James Bond film Casino Royale were available over a month before the film's scheduled release date.
Nevertheless, Screen Digest finds some positive developments for the film industry. First, China's authorities are taking "meaningful steps" to address the country's severe shortcomings in IPR enforcement.
Second, the government is supporting a strategy to bring cinema to both rural Chinese and also even more urban areas to help the film industry expand its market.
Screen Digest forecasts that by 2010 the Chinese will be spending in excess of $500m on DVDs. But the market will continue to fall short of its true potential and remain unattractive to western investors because of the issues of piracy and disputes over DVD royalty payments.
