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U.K. Retailers Bristle at Warner Tiered Pricing

10 Jun, 2002 By: Jessica Wolf

Retailers large and small in the United Kingdom are up in arms over Warner Home Video's recent decision to institute tiered pricing on VHS and DVD product in the country.

Starting with the studio's July 15 release of Training Day, all Warner VHS and DVD product will be released simultaneously for the rental and sellthrough markets in the country, but video dealers who use the discs and cassettes for rentals will pay a higher price for each VHS or DVD, according to published reports in the United Kingdom. The studio also is looking to halt the sales of previously viewed discs or cassettes of its product in the country.

The absence of a law like America's First Sale Doctrine and the existence of a European law called the Rental Right Directive make it possible for any supplier to charge two different prices for the same title.

According to U.K. retailers interviewed by U.K. trade magazine View, the retail community in the country is far from supportive of Warner in this matter.

Alex Sparks, Blockbuster's SVP and managing director in the United Kingdom told View his company is very concerned with what this strategy means for Warner's future intentions toward the rental market and said the studio's move undermines Blockbuster's ability to give consumers what they want.

“Movie rental has always been the most affordable option for customers, and we believe this might be the first step in a wider play to eliminate the rental industry in favor of other channels,” Sparks told View.

Iain Muspratt, chairman and chief executive of Home Entertainment Corp., which owns two chains in the country -- Video Box Office and Choices Video -- told View he thinks a rental premium for product without a window is economically inappropriate and unenforceable except against larger retailers, which would be disadvantaging the very businesses that grew the rental trade in the first place.

Warner's official line on the new program has been that it will allow the studio to support both the rental and retail business for product with dual advertising and promotion. Retailers, however, said they fail to see how that will make up for the complete loss of a rental window.

Representatives Kevin Morris and Neil Whitfield, from U.K. chain Apollo Home Entertainment, told View they believe the plan will cost Warner more money than it produces and will eventually fail.

“Why on Earth would Apollo, or any other rental dealer, support a scheme that we believe would hasten the demise of the video rental industry?” Morris and Whitfield told View in a statement. “Equally, why on Earth would we spend money with a company with so little regard for, or understanding of, our business?”

Large retailers were equally concerned with Warner's proposed nix on used-video sales.

Blockbuster's Sparks said his company will be “reconsidering our trading relationship with AOL Time Warner” in light of Warner's decision to try to keep retailers from selling off used product.

Steve Sheasby of the Movie Zone chain told View he was perplexed at the restriction and suggested it was perhaps a negotiating ploy that Warner may give way on as a tool to placate retailers angry over the tiered pricing.

Regardless of studio motives, most retailers see restrictions on previously viewed sales as money out of their pockets. Many independent retailers interviewed said they would continue to sell used tapes and discs anyway.

“I'm going to sell mine off when I want to, they're my property,” Mike Rose of Woodhatch Video in Reigate, London, told View. “I'm just going to ignore Warner -- it can take me to court if it wants to. The more publicity I can get, the better.”

There's still no word on how Warner would enforce its no-previously-viewed-sales policy. There's also been no communication so far on how the studio could prevent retailers from simply buying titles at the retail price from local grocery stores, which is what some indie retailers interviewed said they would do instead of paying Warner's rental-premium price.

After the announcement by Warner Home Video, late last month one of the country's rental trade organizations, the Entertainment and Software Retailers Association (ESRA) met to review reports from legal advisors and come up with a strategy to respond to Warner's new business plan.

Last year, the studio tried a similar pricing shift in Australia, but the country's trade organization took Warner to court and the studio's tiered pricing was shot down in December.

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