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DVD-Only Supplier Lets Retailers Dupe VHS

1 May, 2003 By: Joan Villa

In a unique twist on suppliers' efforts to bridge the VHS-to-DVD switch, a major distributor of Indian films is offering retailers an unusual license fee to allow them to duplicate its entire DVD-only library onto VHS for sale and rental.

Eros Entertainment, a U.S. subsidiary of a British company based in New Jersey, has a library of about 1,000 DVDs representing close to 70 percent market share of the Indian film market in the United States, according to the company's attorney, Jason Drangel of Bazerman & Drangel in New York. But thousands of mom-and-pop shops catering to the Indian community in centers clustered in New York, Florida, California, Illinois and Atlanta have been illegally duplicating the DVDs for sale and rental on VHS in order to meet customer demand, he said.

“The problem is, obviously Eros would rather have people purchase the DVDs but also wants the market to be satisfied, and it's just too expensive for Eros to do DVD and VHS for every one of their movies,” Drangel said. “There are thousands of these Indian stores in the U.S., and a large portion were just making their own VHS tapes.”

The situation got so bad that Eros was forced to send a “cease and desist” letter to about 1,000 stores with a VHS licensing proposal: Pay a one-time $5,000 license fee, followed by five $1,000 payments, and on your own premises you can legally duplicate Eros' entire library onto VHS for three years.

Drangel, who specializes in intellectual property, admitted it was difficult to set a price for the VHS license, but the aim was to help retailers make the transition from VHS to DVD while preventing chaos in the marketplace.

“It's a price we figured was an incentive and also a deterrent,” he said.

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