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UK Retailers Up In Arms Over Tiered Pricing

28 Jun, 2002 By: Jessica Wolf

By THOMAS K. ARNOLD and JESSICA WOLFCall it the showdown in the United Kingdom: British retailers say they will no longer buy Warner Home Video product because they're mad about the studio implementing two-tier VHS and DVD pricing, eliminating rental windows and banning the sale of previously viewed videos.

“It is looking like 80 to 90 percent of UK rental outlets will not be taking Training Day. More than that, every single [major] chain is saying that they will not buy any Warner product at all,” said retailer Chris Simpson of the London-based Primetime Video chain, one of the six largest chains in the country.

“Blockbuster UK has already issued statements to customers, and several chains, including ours, are having notices done explaining the position and asking [customers] for support in the ‘war against Warner,’Simpson said. “Many smaller dealers are asking [the trade group Entertainment Software Dealers Association] ESRA to produce a generic notice for them to use.”

Shortly after Warner Home Video UK's official notice to retailers last month, ESRA began looking into ways to legally combat the studio's new pricing strategy, which requires video rental dealers in the country to pay a premium price for titles that are simultaneously available to retail at a lower price.

Although an official, organized boycott is illegal under British law, retailers across the board are reaching the same independent decision to not carry Warner product. Retailer message boards in the country are teeming with angry comments, copies of letters to consumers and strategies. Moreover, Simpson said, many retailers are encouraging their customers to re-evaluate how they patronize Warner-owned companies in the country, including movie theaters.

Beginning with the July 15 release of Training Day, rental dealers will be able to buy cassettes for £15 to £20, down from £35 to £40, and DVDs for £15 to £18, up from £10 to £12.

Sellthrough retailers will be able to buy the same titles day-and-date for £6 to £10 on VHS and £8 to £12 on DVD.

Rental dealers are upset because they say Warner won't let them rent the cheaper cassettes and discs, which are specially marked for sale to consumers only. Warner can do this under the European Union's Rental Right Directive, which allows European suppliers and distributors of any product to charge different prices, depending on the end use.

In a letter sent to retailers in the country two weeks ago and obtained by Video Store Magazine, Warner outlined its new pricing and enforcement policies.

“In order to ensure the success of this launch, and that reputable rental outlets are not disadvantaged, Warner Home Video representatives will randomly visit rental outlets across the country to confirm the correct product is being offered to customers. Warner Home Video (UK) Limited may store and make use of the information collected during these visits to ensure that products are used only as authorised. Offering the retail product for rental constitutes copyright infringement. It is the policy of Warner Home Video (UK) Limited to take action against parties who violate the new Terms,” the letter reads.

The letter includes a full listing of terms, descriptions and samples of the new logos and color coding system that will identify product as rental titles and asked for the reader to sign an agreement to the new terms.

“Dealers are furious not only about what Warner is doing, but at the way they have been treated, Simpson said. “The buzzword here is that Warner is ignorant, arrogant and rude.”

Warner Home Video executives were not ready to comment at press time, though reportedly the studio planned to make a statement sometime last week. But insiders say there's a tradeoff in the new pricing strategy: while DVD prices for rental dealers are going up, VHS prices are coming down, “making rental more profitable for retailers.”

But since the announcement, rental dealers in the country have repeatedly said a premium price for no rental window just doesn't add up.

A Hollywood insider said there's a benefit in that studios traditionally spend a lot more money marketing, promoting and advertising video titles that are available for sale to consumers.

“Retailers will benefit from increased marketing support,” one insider said. “There will be increased consumer demand, due to an increase in marketing dollars when all formats for all classes of trade are released simultaneously.“We normally don't do things that hurt the category.”

Retailers also are angry that Warner will no longer let them sell off used rental copies after their rental legs have worn out. Under the new Warner plan, cassettes and DVDs designated for rental will always remain that way.

“We would like there to be a period of time in which product goes in for rent and stays for rent,” an insider said.

“Until authorised for resale by Warner Home Video (UK) Limited, the rental product remains the property of the company and any unauthorised resale or other disposal is strictly prohibited,” Warner's letter to retailers read.

The boycott of Warner product also could potentially affect two independent suppliers: Icon Films and Helkon Pictures. Warner distributes these companies' products, and Simpson believes they are ready to break away from Warner because of the lack of retail support the studio has in the country.

Warner effectively started this new pricing plan with the video release of Harry Potter and the Philosopher's Stone last month, but did not make the strategy official until shortly after that video's launch. The timing may, however, explain why the studio flew American reporters to London for the video launch while snubbing the UK press.

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