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Tuesday, June 12, 2001
European Union probes DVD pricing - Update 1


"...The European Union launched an investigation into DVD pricing in Europe Monday, warning that companies found guilty of colluding in pricing policies could face fines of 10 percent of their revenue. EU action could even force major film companies to abandon the regional pricing structure currently in place, antitrust lawyers said. The investigation encompasses the second-largest DVD market for studios in the world -- Europe generates more than half of all video revenue outside the U.S. -- and threatens to undermine studio strategies that protect the staggered theatrical release of movies in different countries following release in the United States. The actions of the EU Commission follow a similar move last month by the Australian Competition and Consumer Commission, which asked Australian subsidiaries of U.S. studios for an explanation of how they use regional codes on DVDs and how they price the discs in Australia. Concerned that pristine copies of digital DVD movies released in the U.S. would be pirated and sold overseas before the films were released theatrically, studios used digital technology to devise a system that would allow DVDs sold in a specific country or region to be played only on machines sold in that same country. But that system has led to DVDs in some countries being priced 50 percent to 75 percent higher than in other countries. For instance, DVD movies in Europe and Australia are generally priced between $32 and $45, compared with average retail prices of $20 to $26 for the same titles in the U. S. Although studios would not comment officially, one executive said that overseas markets that introduced the DVD format a year or two after it was introduced in the United States are seeing pricing that is comparable to pricing a year or two ago in America. Competition and the maturation of the market will likely reduce the premium on DVDs in other territories as it has in the U.S., the exec suggested. Further clouding the issue are evolving legislative and marketing policies regarding differing rental and sell-through prices between stores in the same country at the same time. Only the U.S., with its First Sale Doctrine, prohibits that form of pricing according to retail functionality..."



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