Last year, Warner Brothers reportedly introduced cut-priced DVD versions of its Hollywood movies for 22-28
yuan (2.7-3.4 dollars) in China. The price cuts were a direct attempt to compete
against pirated versions of the same movie which sell in supermarkets for as
low as 5 yuan (about 60 cents).
However, MSNBC reports that
less than a year later, Warner is further lowering its Chinese prices once again, by about 50%, to
12 yuan ($1.50). The new cut-rate releases, called “simple pack” editions,
contain cardboard packaging and few special features, compared to the typical
plastic DVD case and loads of special features like deleted scenes and
US film companies are betting that the Chinese population is ready to accept
paying a premium for legitimate Hollywood DVDs. Indeed, as the urban middle
class becomes more affluent, they will naturally want, and can now afford,
luxury items like DVDs. Through the internet and the Westernization
of China’s middle class, Chinese interest in Hollywood films is increasing. For
years now, Chinese films have stood alongside Hollywood films in Chinese video
rental stores. With the government allowing only 20 Hollywood movies to be
shown per year in theaters, and a general dearth of theaters, watching DVDs
(and VCDs) at home is the way in which most Chinese consumers are able to enjoy US (and Chinese) films.
Despite favorable conditions for Warner Brothers to sell its
DVDs, it’s unlikely that Chinese consumers will switch from buying pirated DVDs
to legitimate copies. For one, the price point for DVDs, at about 5-7 yuan, has
been ingrained for years. Also, the quality and packaging of pirated DVDs are
currently very comparable to what Warner is offering. So, while a growing number of Chinese can certainly afford twice what they currently pay for DVDs, they have little incentive to do so.
In the West, some incentive for purchasing legitimate goods arguably stems from a culturally instilled sense that purchasing pirated goods is moral and legal wrong. However, in China, these ideas are nascent, if they exist in any meaningful way at all. Buying pirated content is the norm, and finding a legitimate copy of
media is the exception.
So unless Warner can convince consumers that its product is
superior to pirated versions, either through incentives, moral justification,
or legal pressures, it’s unlikely that they will have success selling their
product at twice their competitors’ price.