Warner Home Video Strikes Back

In recent years, China has been the world wide target of the piracy of intellectual properties, such as software, video games, movies, etc. Much has been said and little has been done on either side. This has aroused much agony in US and many companies have been trying to prevent the Chinese piracy, through legitimacy or political pressure on China or some other marketing strategies as the same day release. I think one of the most genius marketing idea is the recent Time Warner's press release of a joint venture video operation with China Audio Video (CAV).

The major reason for the piracy of USA movies is because of the price difference. In USA, the regular DVD price is from $10 to $30. But in China, you can get the pirate DVDs on the street at US$1 or US$1.5. I bought the first 3 seasons of the famous TV series "24" on the street in Shanghai for only US$6. But the DVD can only be played on our computer instead of on DVD player and the image is not as good as regular DVDs. In USA, I have to pay at least 1o times as much so the price difference makes me disregard these shortcomings of the pirated DVD. I think it is for the same reason that millions of Chinese are not willing to pay 10 times of the money to buy an imported DVD.

After this joint venture, the Warner's DVD price will only be about $1 higher than the pirated copy. However, the image quality will be much better and it will be totally legitmate. Because of the standard of life increase in China, I believe a lot of Chinese can afford the price difference and will start switching to Warner's new DVDs.

Just like General Motors has produced difference cars for "Purse, purpose and personality"(Kotler Armstrong, "Principles of Marketing", p252), Time Warner is making DVDs for different international market. They use the segmented pricing for differentiated market very well. I beleive sooner or later, I will see the pirated DVDs disappear from the streets in China.