Warner Bros., Paramount and DreamWorks are teaming to battle piracy in China, the world’s largest market for illegal DVDs.
Under the deal, unveiled Wednesday in Beijing, the trio will sell new international titles for $2.95 through the joint venture CAV Warner Home Entertainment, in some cases with a window of as little as two months after a movie’s U.S. theatrical release.
Industry sources said other studios could join Warner’s distribution network “within the next year or 18 months.”
Deal is part of an effort to build a market for low-cost legitimate products in the potentially huge Chinese market. Some 3 billion discs were sold in China last year, and the market is worth some $2.5 billion, but only a tiny fraction of that was spent on legitimate DVDs, so the studios are keen to make their mark.
The first DVD rolled out was “Transformers,” which is the biggest film in Chinese theaters this year and the second biggest of all time after “Titanic.” Disc went out Nov. 1. “Shrek the Third” is next up, set for release Nov. 28.
“Warner has demonstrated that securing key retail outlets in China is necessary to supplant pirated content with legitimate product to fight piracy in the market,” Paramount Home Entertainment prexy Dennis Maguire said at the news conference.
Next year’s releases through Warner in China will include “Iron Man,” “Indiana Jones and the Kingdom of the Crystal Skull” and “Bee Movie,” he said.
DVDs released under the deal in China will have the earliest release and lowest price in any market in the world, making them attractive alternatives to lower-quality pirated products, said Philippe Cardon, prexy of Warner Home Video Intl.
“This agreement will have a big impact on the development of a legitimate DVD market. It further strengthens our value proposition to readily provide inexpensive, quality DVDs, which appeal to consumers who are used to purchasing cheap, pirated products,” he said.
Warner launched the CAV Warner sales network in 2005 to fight piracy by selling bargain-priced DVDs and now has 20,000 outlets in 50 cities and has sold some 400 titles.
The outlets include international retailers such as Wal-Mart and Carrefour, plus Chinese state-owned bookstore chain Xinhua and many local retail outlets served by wholesalers, said Tony Vaughan, the Shanghai-based managing director of CAV Warner. Chinese versions of Amazon.com are another way forward.
“Our way of fighting piracy is to make sure the Chinese consumer gets the film before anyone else. Having two more Hollywood studios gives us much more critical mass,” Vaughan said.
Beijing has increased penalties for product piracy and stepped up enforcement under foreign pressure. The U.S. government has complained about China’s record on intellectual property rights to the World Trade Organization.
Pirates can get DVDs on the street within hours of a pic’s release abroad and months before a legitimate DVD is available. They sell for as little as 68¢. The Motion Picture Assn. estimates that more than 90% of DVDs in China are pirated, costing Hollywood studios $244 million and Chinese studios $2.4 billion in lost potential B.O. in 2005.
Studios are thinking creatively of ways to beat the pirates. For example, many people want to buy legitimate children’s DVDs to avoid tears when the disc doesn’t work or doesn’t include all the extra features. Specially packaged gift sets and box sets are also popular.
Studios have also learned to be quick on their feet. When a low-quality pirate version of “Happy Feet” hit the market, Warner Bros. brought out a legitimate version quickly to meet an obvious need. Warner is also working on establishing a legal download system.