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FROM THE HOLLYWOOD REPORTER: Warner U.K. Will Carry On With Tiered Pricing

13 Sep, 2002 By: Sam Andrews

LONDON -- After declining comment since July on the boycott of its releases by Britain's rental dealers, Warner Home Video U.K. broke its silence Thursday, saying the upswing in its sell-through business more than compensates for the loss in rental trade.

In an interview, WHV U.K. managing director Neil McEwan said he regrets the boycott but noted that the new trading platform, which cuts out the rental-to-sell-through window and has a controversial two-tier rental pricing structure, is proving highly effective.

"Clearly, we'd like to be trading with everybody all of the time, making as much money as we possibly can," he said. "But a good example of the effect of the new system on our business is last week's release of We Were Soldiers."

WHV U.K. released Soldiers the same week that Fox released Behind Enemy Lines. McEwan pointed out that both war films had done much the same box office and have similar-strength casts.

"Their DVD was £2 ($3.11) cheaper than ours — as pretty good a comp as you're going to get — but they've had a rental window, and we haven't," McEwan said. "We've outsold them more than 2-to-1. So already, based on what has been sold over the counter, we're £400,000 ($622,240) ahead on our retail business, which pretty much compensates for the lack of support in the rental trade."

McEwan also laid out the position of the importance of rental to WHV U.K., saying it now accounts for "significantly less than 10 percent" of WHV U.K.'s revenue.

"It seems unlikely, even with advent of DVD and the growth that has given the sector, that there will be net growth in rental," he said. "But there is a massive opportunity for continued growth in retail."

He pointed out that any further weakening in the rental sector's performance would affect only the window between rental and pay-per-view movies.

"I think it will certainly encourage us to look objectively at the window," he said. "The argument we've always put forward is that, provided we have a strong, vibrant rental business, that will give us a very good chance of protecting the rental window. The minute we don't have a strong, vibrant rental revenue, it will make it very difficult for us to protect the rental window."

Warner has had to face a ban from the shelves of a large number of the U.K.'s major rental chains. Claiming to act independently, Blockbuster, Apollo, Global Video, Primetime and Movie Zone have decided not to stock such releases as Training Day and the Warner-distributed Icon title Soldiers.

WHV's stance was reinforced this week by the Office of Fair Trading, which decided there was no need to open an investigation into the dispute.

"If, because of the extra benefit we get out of the retail business, we can make as much money as we would have made with the old platform, then that can only encourage us to carry on," McEwan said.

He claimed that independent retailers are beginning to buy Warner films once again.

"Gradually, more and more independent dealers are starting to stock," he said. "We've had far more support (for Soldiers) than we had on Training Day — I think they are beginning to realize that their customers are losing out by not being able to support the titles."

Most notably, WHV U.K. managed to persuade Iain Muspratt of the Choices chain to break its boycott and resume trading last month.

That move and the decision of Icon to remain with Warner caused a fierce and at times ugly wave of criticism from the trade. Personal attacks on McEwan as well as Muspratt and Icon chief Nick Hill have been at times vitriolic.

"I think it has been especially hard on Iain Muspratt and Nick Hill," McEwan said. "They have been subjected to some very serious abuse, which, given the amount that they as individuals have contributed to the business over the last 20 years, is totally unfair."

But as far as the boycotting dealers are concerned, "the big issue seems to be the principle," he said. "Across Europe, this platform has been enforced in every country and is only really seen as an issue in the U.K. -- it's not even seen as an issue in Ireland. I should say Blockbuster sees it as an issue in Ireland and Spain. So Blockbuster sees it as an issue, and the British dealers see it as an issue."

Blockbuster U.K. managing director Alex Sparks declined to be interviewed for this report.

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