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WHV China plan: pre-empt piracy

'Superman' vs. pirates

Thomas K. Arnold and Jonathan Landreth
Warner Home Video said Thursday that "Superman Returns" has been released on DVD to thousands of Chinese retailers two months earlier than anywhere else in the world as part of a new initiative to combat rampant piracy in the world's most populous nation. But pirates still beat the studio to the punch.

Bootleg DVDs of the film, with a crisp picture and audio and subtitles in Mandarin and English, were easily found Thursday on the streets of Beijing selling for 10 yuan ($1.25).

"That doesn't surprise me," said Mark Horak, executive vp and general manager of Warner Home Video, Asia Pacific and Latin America. "But at least now a consumer there has a choice of buying a legitimate copy, of higher quality and with all the extras, for not much more."

Legit DVDs of the summer movie, encrypted to make it difficult to copy, are now on sale at more than 8,000 Chinese retail outlets, many of which previously carried only pirated copies of Hollywood movies, according to CAV Warner Home Entertainment, the joint venture Warner formed in November 2004 with China Audio Video.

The Mandarin-language DVDs cost about twice what counterfeit DVDs typically sell for but less than the average pricing of official studio releases. The single-disc "Superman Returns" costs 14 yuan (about $1.75), while the two-disc special edition is available for 22 yuan ($2.75). Hollywood product typically sells for 20-30 yuan.

A pirated boxed DVD copy of "Superman Returns" was available for purchase Thursday for 10 yuan ($1.25) from a brightly lit and well-organized shop opening onto a popular Beijing bar street frequented by expatriates and just around the corner from a local police station.

"Piracy is a big problem in China, as it is in many markets around the world, and it requires a very specific approach and strategy to fight," Horak said. He added that while Warner has been steadily pushing up DVD release dates in China, the "Superman Returns" window is twice as long as any previous one. While in the past Warner has stuck to traditional retailers, with "Superman" the studio took square aim at the many independently run storefronts -- "bodegas," Horak calls them -- that deal primarily in counterfeit goods.

"Imagine walking through a city and every 100 yards or so is a little store that sells pirated product," Horak said. "The campaign we put together behind 'Superman Returns' is intended to build out our distribution for Hollywood product in those stores that previously only sold pirated product."

The unprecedented step was taken in conjunction with the Chinese Ministry of Culture's anti-piracy initiatives, Horak said. Spurred by reports from the MPA that China's piracy rate, at 95%, is among the highest in the world, Chinese authorities in July began a 100-day crackdown on retail sellers of illegally copied optical discs, stepping up raids on shops and warehouses and inspections at airports, harbors and railroad stations.

"The fight against piracy requires a supportive environment from the entire society," Zhang Xinjian, deputy general director of the Audio-Video Market Administration Bureau of the Ministry of Culture, said from CAV Warner, the first in-country DVD business established in China by a U.S. studio.

"Superman" won't be released domestically until Nov. 28 at $28.98 for the single disc and $34.99 for the two-disc special edition. In other territories, the DVD goes on sale at about the same time.

As a part of its anti-piracy campaign, the Ministry of Culture also sent letters to provincial governments, including specific mention of "Superman Returns," the group said.

"The efforts of the Ministry of Culture to cultivate a viable, legitimate home video market in China are invaluable to CAV Warner Home Entertainment," Horak said. "The government's 100-day campaign is clearly having an impact on the legal market."

Horak estimates Warner alone loses "several millions of dollars a year" to piracy, which is why the studio for the past two years has been targeting China with a series of aggressive anti-piracy tactics.

"For years we lamented the absence of a viable business in China," Horak said. "So our approach at Warner has been to proactively work with the Chinese government to develop a legitimate business that would appeal to Chinese consumers."

With the formation of CAV Warner Home Entertainment came an immediate price drop, from 80 yuan-90 yuan to 20 yuan-30 yuan.

"Our first goal was to make the product more affordable," Horak said. "We went from pricing that was 10 times the pirated rate to a multiple of two. So we're still higher, but we offer higher quality with all the extra features that go with the legitimate release."

The next step was to gradually nudge up DVD release dates so that big Warner titles go on sale in China two weeks to one month before they are available anywhere else.

"We did that with titles like 'Batman Begins' and 'Harry Potter and the Goblet of Fire,' " Horak said. "We work closely with theatrical to release our DVDs in China as soon as possible, typically within two or three months of their U.S. theatrical debuts."

New with "Superman," Horak said, "is this strategy of building out additional points of retail."

Thomas K. Arnold reported from Los Angeles; Jonathan Landreth reported from Beijing.
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