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Piracy and Warner on International Retailers' Watch Lists

1 Aug, 2002 By: Jessica Wolf

LAS VEGAS -- A gathering of international retailers meeting found common, worrisome ground in at least two areas: increasing competition from piracy -- especially on DVD -- and Warner Home Video's recent pricing changes in the United Kingdom.

No one has to look hard to find pirated product in any country's marketplace, attendees agreed on the final day of this year's Video Software Dealers Association convention.

“Right now, at every single High Street market in every single city in England, you can buy a perfect copy of Spider-Man on DVD any day of the week,” said Chris Simpson, of British chain Prime Time Video, who led the informal discussion.

Many industry members at the session -- representing Australia, Brazil, England, Italy, the Netherlands, Norway, Poland, Scotland, South Africa, Spain, the United States and Wales -- said they worry Hollywood studios aren't doing enough in their countries to combat piracy, which is the studios' responsibility as copyright owners of the product.

Participants noted dwindling numbers of FACT (Federation Against Copyright Theft) representatives in their respective countries. FACT is the Motion Picture Association's studio-funded enforcement arm in its piracy battle.

But, though piracy is rampant in every country, there are only 10 FACT agents in England, only two in Poland, three assigned to Holland and just one in Australia, retailers from those countries said.

Meanwhile, some noted, studios regularly employ dozens of staff members in marketing and promotions departments. And, word is Warner plans to beef up its staff in the United Kingdom to police its new tiered-pricing strategy and previously viewed video sales ban.

As expected, a main problem for those in attendance was Warner's recent implementation of tiered pricing on all VHS and DVD product released in the United Kingdom. As of July 15, all Warner titles are priced at a premium for rental dealers in the region at the same time they are released at a lower price for sellthrough retailers.

Many at the VSDA session said the pricing change reveals the studio's desire to end rental.

Warner's new dual-pricing strategy -- legal in the United Kingdom, thanks to a European law called the Rental Right Directive -- has stung rental dealers, not only because of what it means to their businesses, but because of the way the studio handled the situation, retailers said.

In the months before Warner's official announcement of the strategy, rumors circulated about the pricing changes, which Warner representatives repeatedly denied, retailers said. Then, just weeks after Warner's latest denial, the studio sent out form letters to every rental dealer in the country, outlining the plans and providing color copies of its new packaging, with mockups of “For rental only” or “For sale only” labeling.

U.K. dealers said they were offered no negotiation of terms and were basically told, “if you don't like it, don't buy it.”

That's what many decided to do, on an individual basis, however, because an official boycott would be illegal in the U.K.

“We estimate 80 percent of retailers in the country are not ordering Warner titles,” Simpson said. “I've been amazed that everyone from Blockbuster all the way down have made the same decision.

“But the response from Warner is that they don't care,” he added.

The true test, everyone at the session agreed, will come with Warner's upcoming release of Ocean's Eleven. So far, the biggest title affected was Training Day, released July 15 in the region.

Most agreed that as soon as one U.K. retailer breaks down and orders Ocean's Eleven, the rest would have little choice but to follow suit.

Warner tried a similar pricing strategy in Australia, twice. The first time the country's federal court stopped the practice after the trade group, the Australian Video Retailers Association (AVRA), challenged the studio. Warner attempted the strategy again, and once again AVRA filed an unfair trade practices suit.

This time, Warner and AVRA settled out of court, both sides signing a “strong” confidentiality agreement, said AVRA board member Jeff Menck.

Menck said what he could about the results of the settlement.

“Two-tier pricing is a thing of the past in Australia,” he said. “There are currently no restrictions on the sale or rental of Warner product.”

U.K. retailers at the session warned U.S. retailers -- though the First Sale Doctrine protects their right to rent product -- not to be so sure studios won't try the same thing in this country.

Overall, retailers agreed there often aren't enough resources or shared information available to them to fight battles with suppliers.

John Mitchell, a Washington, D.C. attorney attending the session, mentioned a group called the Global Entertainment Retailers Alliance -- an organization that usually deals with packaged music, but is starting to branch out into representing video product and retailers.

Those meeting at the VSDA session seemed interested in coming up with a way to pool resources and share information across borders.

Information, one attendee pointed out, is pretty much the only thing there is for international retailers to gain from the revamped VSDA convention. There never was much of a business-type benefit for retailers attending from outside the United States, he complained, and the glamorous, vacation-like atmosphere of the show is all but gone as well.

One studio representative showed up at the seminar, Paramount Home Entertainment International president Phil Jackson, who recently relocated to Los Angeles after the studio moved its international headquarters there from London.

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