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Two-Tier Pricing Brings Changes Around the World

7 Dec, 2001 By: Jessica Wolf

An upcoming pricing paradigm shift by Universal Pictures International, which provides international home video distribution for DreamWorks titles and, beginning in 2002, Universal Studios titles, has retailers in the country skeptical and shows how the studios are often more willing to tinker with pricing outside the United States.

Beginning with the January release of Jurassic Park III in England, UPI will release Universal titles on DVD day and date with the VHS, both at a rental price. Then, anywhere from four to eight weeks later, both formats will be repriced for Britain's retail (sellthrough) market. Traditionally that window is six months.

Retailers in England and other parts of Europe have for a long while enjoyed a rental window on many DVD titles, including DreamWorks product, which UPI distributes internationally. In the past, Columbia TriStar has handled international distribution of Universal DVD titles, releasing big hits at a sellthrough price, though Universal fought for a rental window on DVD for big titles like The Green Mile, Billy Elliot and Bridget Jones's Diary. That distribution deal ends this year.

Taking over distribution of its own video product and offering the shortened window ensures a rental window for Universal DVD product in England, which could be seen as a boon to retailers. However, according to a story in England's home entertainment trade magazine View, which interviewed rental dealers across the country, dealers fear that the studio will most likely charge too much for each individual title to make a window as short as one month profitable, especially for independents.

View, reported the studio will most likely drop the rental price from the premium, which is the equivalent of about $75, on an individual title basis. But most retailers polled in the story said Universal is not likely to lower the price enough. Many said a title with a four-week window should be priced at £20-£25 (approx. $35-$40) and [pound symbol]30 (approx. $45) for an eight-week window.

In a previous release—that looks like a test for retailer reaction—instead of releasing the blockbuster hit Gladiator direct-to-sellthrough last year, UPI gave the title a four-week rental window in both formats in order to give rentailers a shot at revenue and also reap the benefits of a sellthrough price during the holiday shopping season. The studio also significantly dropped the rental price.

Barry Robinson of AndyKims Movie Zone in Leicester, England, told View that the four-week Gladiator window was good for rental dealers but that doesn't mean such a short window will be an overall success.

"A major title could earn the money back," he told View. "Gladiator was a big title with a short window and that worked. But it won't work with all films. We paid £20 for Gladiator; I think £20 for a four-week window is good, but I can't see Universal dropping to that."

One retailer, Demie Loizou of Visions Movie Zone in Warrington, England, told View, that retailers need at least a 12-week rental window to get a good return on investment with current pricing and that he thinks Universal's move will devalue rental product. "Customers will see titles in the shops soon after and think we are paying the retail [sellthrough] price," Loizou said.

Other retailers quoted in the story worried that the move would lead other studios to do the same and also lead to tightening pay-per-view and satellite windows.

Universal's statement to View cited an increasing penetration of DVD hardware in the country as part of the reason for the move and said that a short window will actually help both the rental and sellthrough markets because studio advertising and

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