Battle of Britain: Piracy, pricing key DVD issues
Markets spell trouble for vid shopsLONDON -- Price and piracy once again dominated the U.K. home entertainment scene this year, with both issues raising hackles throughout the industry as 2006 draws to a close.
For instance, the major supermarkets here are using DVDs as loss leaders -- offering such hot new releases as "Pirates of the Caribbean: Dead Man's Chest" for less than £10 ($19.60).
Gennaro Castaldo, head of communications at leading U.K. specialist entertainment retailer HMV described the supermarkets' actions as being "like a cuckoo in the nest that works against the best interests of the industry and other retailers. I can't think of a thing the supermarkets do in a positive way to develop and sustain the industry."
He adds that specialists such as HMV have "almost written off the blockbuster releases as revenue earners" because of supermarket pricing and have been forced to concentrate even more on deep catalogs.
"Giving it away below cost also damages the aspiration to collect DVDs because consumers perceive it as an almost throwaway product," Castaldo said.
Castaldo argues that, far from benefiting the consumer, the cumulative effect of this sort of price-cutting is putting specialist retailers at risk and "damaging the diversity of the retail landscape in towns."
While supermarket pricing on new releases has drawn gasps of pain from specialist home entertainment retailers and distributors alike, some industry leaders, like Universal Pictures International Entertainment president Eddie Cunningham, believe there isn't much more room for prices to fall -- on catalog titles at least.
"But to be honest, I've been saying that for 4-5 years," he explains. "I take a little bit of consolation in the fact that most people must be looking at the £5 catalog price point and saying if they move to £4 they will need a third more volume just to stand still."
Unofficial estimates suggest that if December retail sales match those of 2005, the U.K. business will see a sell-through volume of about 222 million units. The problem is that the overall value of those sales has fallen roughly 7% thanks to the proliferation of cheap chart releases.
Most distributors and specialist retailers seem at a loss as to what to do to counter the plummeting prices. Some point to the proliferation of giveaway DVDs attached to newspapers as a contributing factor, saying that it sends consumers the message that DVDs are virtually free.
Sony Pictures Home Entertainment, which will release "Casino Royale" next year on DVD, is rumored to be contemplating a particularly high dealer price for the hugely successful Bond movie in a bid to combat price-cutting.
But, for many in the industry, the major issue facing the business is still piracy. Seasoned observers note that the issue has become much worse with the virtual elimination of the independent rental dealer, who provided the eyes and ears at local level in the fight against intellectual property theft.
"We feel abandoned," said John Worthington, owner of a rental store in Deal, Kent. "On the real frontline, the next person through your door could be someone telling us we are unemployed."
Creative Industries minister Shaun Woodward told the British Video Assn. recently that more enforcement officers was not the answer and that the movie business had to tackle the problem on a global scale. "If you only look at it in the context of the U.K., you won't achieve the solution you want," he told the association's recent general meeting.
Responded BVA director general Lavinia Carey: "Enforcement is the key for us and if we could see a lead coming from the Department for Culture, Media and Sport in trying to reinvigorate the creative industries' Intellectual Property Rights focus group or forum as it was then I think that would be extremely welcome."
The studios are moving to help themselves, however, with sources suggesting that Warner is leading a group of distributors who wish to significantly increase the financial commitment to fighting piracy. They argue that the losses justify the investment.