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Warner Uses <I>Potter</I> to Crack Japan

10 May, 2003 By: Stephanie Prange

DVD penetration in the United States is heading to the halfway mark, and it won't be too long before the sellthrough market for DVD reaches maturity domestically. But penetration across the globe offers a new area of growth for studios interested in turning movie fans into DVD collectors.

At last month's London launch for Harry Potter and the Chamber of Secrets, Warner Home Video EVP of worldwide marketing Mark Horak said the studio is eyeing business beyond U.S. borders, adding that global markets offer “great growth potential” that “could double the size of the business.”

He said Warner hopes to spread the studio's sellthrough DVD philosophy around the world.

But Japan is a particularly difficult nut to crack, he said, as the Japanese are trained to rent because the country's hardware and software prices are high. The hardware prices are high, in part, because Japan is the home market for many consumer electronics makers. This has resulted in a lag in DVD penetration there to less than half of the United States', he said. Software prices also are high in Japan. Chamber is priced at about half as much as other major studio releases in that country, Horak noted.

Two years ago, studio executives were looking forward to DVD helping create a strong sellthrough market in Japan. VHS sellthrough never really took hold in the country due to high software prices and storage issues.

It was in the second half of 2000 that Japanese consumers began to really embrace DVD, Lexine Wong, SVP of international marketing for Columbia TriStar Home Entertainment, told VSM in April 2001.

By the end of 2001, consumer spending on DVD in Japan made up 32.7 percent of the country's video software pie, three times more than sellthrough VHS' 9.3 percent, according to global media research firm Screen Digest.

Japan is the world's largest single-territory video market outside the United States and is third after the United Kingdom for Hollywood product, according to Screen Digest. And DVD is fast becoming the format of choice in Japan, said senior analyst Helen Davis Jayalath.

Screen Digest predicts consumer spending on video software in Japan and the Asia-Pacific region as a whole will increase 500 percent by 2006 and expects DVD to make up 70 percent of video spending.

Additional reporting by Jessica Wolf.

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