SEPT. 27 | Warner Home Video and Universal Pictures International are tag-teaming on home entertainment distribution in China and Russia in an effort to thwart piracy.
In February, Warner Home Video and China Audio Video formed CAV Warner Home Entertainment to combat Asian piracy by offering inexpensive studio DVD releases to consumers.
Under the terms of the new pact, CAV Warner will distribute Universal titles in China. In turn, UPI will distribute Warner titles through its Moscow-based operations.
It is unclear how CAV Warner and Universal will price each others’ titles in China and Russia, respectively. But it appears that DVDs will be priced lower than in U.S.
Warner spokeswoman Pamela Godfrey declined comment specifically, but she estimated Universal pricing would be “in the same range” as Warner's China titles.
Financial terms for the distribution deals were not disclosed. In the CAV Warner partnership, China Audio has a 51% stake in revenue, with Warner taking the remainder.
Both Warner and Universal want to bolster their sales strength in these emerging DVD markets. But to prosper, each decided to give the reins to the most established company in the region.
China and Russia represent large new DVD markets as the countries further modernize, but both areas are known as hotbeds for pirated goods.
Currently, 1.7 DVDs are bought per Chinese DVD household, according to research firm Understanding and Solutions. By 2009, that is expected to spike to 2.7 DVDs per household.
Overall DVD unit shipments in China are forecast to rise to more than 300 million in 2009, up from about 100 million DVD units in 2005. Also, stronger government support should work to curb the country’s present 90% piracy rate, where virtually all films are consumed illegally, to 70% to 80% by in 2009.
“China and Russia will be significant growth markets for our companies,” UPI president Peter Smith said. “And we are privileged to enter into a collaborative partnership using the expertise of CAV Warner Home Entertainment and Universal Pictures Russia to complement each others’ DVD product distribution.”
Warner has been one of the few major studio DVD divisions aggressively pursuing China.
It is considered the first major to unspool a near simultaneous U.S. theatrical bow and China DVD launch, with Sisterhood of the Traveling Pants. Warner’s goal was to give Chinese film fans an attractive and legal way to enjoy the film without resorting to pirated copies. In China, Sisterhood DVDs were about $3 apiece, a small fraction of their U.S. retail price (DVD Exclusive, 4-05).
UPI will decide whether to launch simultaneous U.S. theatrical and China DVD launches.
“I would imagine they will determine this on a title-by-title basis as we do,” said Godfrey. “Sisterhood has been the only WHV title release day and date so far.”
But Warner appears willing to launch additional day-and-date titles in China next year.
“To fight piracy in China, this is something we are committed to,” said Mark Horak, Warner executive VP and general manager of Asia Pacific and Latin America. “The selection of titles depends on the availability of film elements and approval among the various parts of our organization. It’s a strategy we will still pursue.”
UPI plans to release 20 Warner DVD titles in Russia over the next several months, including Batman Begins and Charlie and the Chocolate Factory. It also will exploit hundreds of Warner catalog titles already available in Russian.
CAV Warner will release about 15 Universal titles starting in November and between 20 and 30 new films every few months over the next two to three years.
Slated Universal films for China include Ray, The Interpreter and The 40-Year-Old Virgin.
About 200 Warner titles are available at more than 1,500 China retail locations.
“China and Russia are two expanding economies, and we hope by offering consumers high quality, affordable product, we can take a bite out of piracy,” WHV president Jim Cardwell said. “We are honored to work with Universal and to help expand legitimate home entertainment markets that will benefit Hollywood, local retailers and movie fans.”
UPI VP emerging markets Melanie Nicholas added, “The powerful combination of local experience and distribution expertise that Warner and Universal have built up in these emerging markets will prove a considerable force in the fight against piracy.”
Understanding and Solutions believes Warner and Universal are wise to join forces to penetrate China.
“Warner has the strongest presence in the Chinese market out of all the Hollywood majors and has built a sound relationship with local government and retailers,” said Understanding and Solutions analyst Alison Casey. “The more Hollywood studios enter the Chinese market, the more they will begin to change the government’s attitudes toward piracy.”
Casey says the same of Universal in Russia.
“It was the first studio to open up its own office in Moscow, rather than sell through a distributor,” she said. “That enabled them to manufacture DVDs within Russia, so they [avoided] paying high custom duties on discs when manufactured outside the country. Universal has been able to sell its DVD titles at a significantly low price point.”
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