The buzz about HD (high-definition) movies on optical discs might be all about HD-DVD and Blu-ray Disc, but two companies are demonstrating at the CeBit trade show this week a system that delivers HD movies on DVD-like discs for use in cheap players.

The system is called VMD (Versatile Multilayer Disc) and it uses the same red-laser technology that is used on current DVDs. In contrast both HD-DVD and Blu-ray Disc use blue lasers. The colour of the laser is important because it determines the size of the laser dot on the disc's recording layer and that determines the amount of space required to store data. Blue is a shorter wavelength than red so the dot is smaller, data can be stored in a smaller space and more data can be stored on a disc.

Current DVDs can store 4.7GB of data in a single recording layer while HD-DVD manages 15GB and Blu-ray Disc gets 25GB. Because HD content requires more data the disc capacity is very important, and that pushed major consumer electronics companies such as Sony and Toshiba to adopt blue lasers for their new formats.

NME, a US-listed and London-based company behind the VMD format, opted for another approach, said Eugene Levich, chief technology officer of the company, in an interview at CeBit. NME is adding more layers to the disc to increase capacity while keeping the same basic technology as DVD. At present it has pushed the technology to 10 layers, or 50GB, in the labs, he said.

The main advantage of this approach is that the players remain cheap - around $150 (about £85) versus the $500 to $1,000 (£290 to £580) price tags attached to the first generation blue-laser players.

At CeBit the company was demonstrating VMD discs playing HD content on a prototype player and said it plans to launch the format in the third quarter of this year.

"We don't want to be in collision with the big guys," said Levich, referring to HD-DVD and Blu-ray Disc. He said NME will promote VMD first in China and India and then look to Eastern Europe, Russia and South America. "It's enough for a small company like us," he said. "Those markets are a good chunk of business."

The company has already lined up content agreements with companies in India and China, said Levich. In India the deal is with Eros Group, which has a catalogue of around 2,600 Bollywood movies. There are plans to make 50 movies available on VMD by the end of 2006.

In China the company is planning to integrate its business with that of Beijing E-World through an equity swap. Beijing E-World is the company behind an optical disc format called EVD (Enhanced Versatile Disc), a format that's already been launched in China and puts HD content on a conventional DVD.

The integrated company will work with two local consumer electronics makers, Jiangsu Shinco and SVA Group, on players that combine support for VMD with legacy support for EMD, DVD and CD, said Levich.

He believes there is a demand among the middle classes for HD movie content in the markets NME will target, and that could be enough to make the VMD format a success while richer consumers in other countries move to HD-DVD and Blu-ray Disc.