Warner Bros. Plan Targets
DVD Piracy in China
Faced with the growing concern of DVD piracy, one of Hollywood's biggest movie studios is taking steps to fight the sale of illegally manufactured home videos in China.
In the coming months, Time Warner Inc.'s Warner Bros. Entertainment plans to release dozens of its films on DVD to retailers in China -- at deeply discounted prices. The studio's hope: that cheap and legitimate DVDs will compete effectively enough with their bootlegged counterparts to offset the losses the company has weathered from piracy.
Warner's move is among the most-aggressive step taken by a U.S. studio to hasten a legitimate DVD market in China. And it is emblematic of an industry-wide problem that has grown in recent years with the popularity of DVDs. The discs have been a savior for Hollywood, generating profit margins of 50% or more and providing a welcome bulwark to the hardships of the often-unpredictable movie business. But they are also far easier to copy than their predecessor -- the video cassette -- and have therefore made way for piracy.
In China piracy has been rampant. Although the Motion Picture Association of America and U.S. regulators are trying to crack down on bootleggers, legal inquiries may not be able to root out the problem. So, Warner is trying to change already entrenched consumer habits by competing with bootleggers on price.
This year, Warner plans to release more than 125 movies on DVD in China at below-market prices. Some will be bare-bones versions of the films that will be sold in China around the time of their U.S. theatrical release and priced at $2.65. Others, which will contain additional features such as more language selections, interviews with actors and behind-the-scenes footage will be priced at $3.38.
Those prices are higher than those on China's pirated DVD market, where the discs typically sell for $1 to $2. But Warner executives are betting that consumers will pay a premium for their DVDs, which contain the special features and will be of higher quality than the bootlegs.
"It's pretty daunting going into that market to release a legitimate product," says Warner Bros. chairman and chief executive Barry Meyer. "But we really think if we can get in there, we can be a part of the solution and not the problem."
Expecting "a blanket" with a few DVDs displayed on the street, Mr. Meyer was struck by the sophistication of the piracy business during a trip to Shanghai last fall, when he visited a bootleg shop. "Just about every single new movie that was in theaters was on the rack in China -- and looked like a legitimate product," he recalls.
In the months that followed, Warner executives hammered out an agreement with China Audio Video, the government entity that oversees retail and video-content licensing, to sell more DVD titles in legitimate shops. Those talks culminated recently in the deal to distribute more than 100 Warner titles.
Although a handful of Warner titles were released on DVD last November, including "Troy" and "The Last Samurai," the studio's sale of DVDs in China has been relatively small
