Interesting:
Warner Home Video has begun trial sales in China of a movie DVD priced at just Rmb12 ($1.50), a move likely to anger consumers in developed markets such as Europe and the US, who typically pay $20-$30 for a recently released film on DVD.
The test sales of the modestly packaged edition of the The Aviator mark one of the boldest efforts yet by an international film company – WHV's Chinese joint venture, CAV Warner – to adjust its marketing strategies to the potentially huge but piracy-plagued Chinese DVD market.
The "simple pack" edition of the Oscar-winning epic, which comes in a cardboard folder rather than the standard DVD plastic box, went on sale earlier this month in selected Chinese cities, said Christine Hu, CAV Warner public relations manager.
Not that I really want my DVDs with no extras in a cardboard sleeve, but damn, if this is even a viable option for Warner, we American customers must be getting really ripped off.
The price point probably takes American sales into account. But I see what you mean... if they can make a profit off $1.50, what's the marginal overhead here?
But I see what you mean... if they can make a profit off $1.50, what's the marginal overhead here?
I don't know if you can presume they're making a profit. They're probably trying to establish the market first. Short term loss for long term plans seems possible.
You don't have to assume it, but I'm not assuming instead that they're taking a loss.
ETA: taking a loss to provide a product available in the same market for possibly less money.
ETA: taking a loss to provide a product available in the same market for possibly less money.
Well, piracy is a huge issue over there. So even just getting people to
buy
their product from them is a step forward.
Definitely less money. DVDs or computer games/programs are about $1 each in China.
I think I read somewhere that the per-CD cost to manufacture is 3.5 cents. There's a little extra for packaging and marketing, but that still allows for profit at $1.50 per (I'm assuming DVDs aren't greatly more expensive than CDs, although they are some more expensive).
So even just getting people to buy their product from them is a step forward.
Not if they're losing money off it.
It's a small ethical victory, sure, but the problem of piracy from the studio's POV is that it costs them money. So if they're also losing money in this new setup, it's an entirely pointless venture. I think it's safe to assume that they're at least breaking even.
[eta: When I order DVD stock for my office, the cost per disc is about $0.60. Granted, that's in much smaller quantities (usually only 1,000 at a time) than someone like Warner home video is going to be buying, but there is a substantial difference in cost between DVD and CD blank media.]
It's a small ethical victory, sure, but the problem of piracy from the studio's POV is that it costs them money. So if they're also losing money in this new setup, it's an entirely pointless venture. I think it's safe to assume that they're at least breaking even.
I'm not saying it's an ethical victory. I'm saying it's like the difference between iTunes and what Napster was. People used to steal it for free, but when it became cheaply available legally there was a market for it. People still trade songs without paying, but there is a fairly large market as it turns out that likes the convenience *and* legality.
To establish that market I can see them using a business model that is not profit driven over the short term. Like say, the predatory pricing of Borders where it moves in next to an established independent store, and undercuts them on price because it gets discounts from publishers, and then after it drives the indie out, can raise its prices back up.
Of course, I don't know if that's what they're doing, but establishing themselves in the Chinese market is such a huge venture with such a massive potential upside that it seems like it would be worth taking a short term loss. In any event, they have to price their product close to the pirated versions to get a foothold. I'm guessing that's a bigger factor than profit at this point.
I'm saying it's like the difference between iTunes and what Napster was. People used to steal it for free, but when it became cheaply available legally there was a market for it.
They're not trying to combat illegal free movie downloads, they're trying to compete with the pirated DVDs currently available in every store. It's the difference between paying $10 for a CD in a store and paying $5 for the same CD in a slightly shadier store right next to it.
Like say, the predatory pricing of Borders where it moves in next to an established independent store, and undercuts them on price because it gets discounts from publishers, and then after it drives the indie out, can raise its prices back up.
Warner isn' t undercutting anyone -- they're charging twice the street price of a pirated DVD in hopes that people will pay a premium for the legal version. I'm not saying it won't work (a guarantee that the movie on the outside of the box is the same as the movie inside may very well be worth paying extra for), but I doubt very much that they're losing money over it.
