How did CAV Warner Home EntertainmentEntertainment Co.

cope with DVD piracy in China?

BMAN20152 Susannah Jones, Sophie Smith, Dionne Woodward

THE PROBLEM?

95% in 2005

USD $2.7 billion loss per year

Why do DVD pirates in China do so well?

• Low prices

• Quick release

• Wide sales network

• Wide network of movie sources

What moves did Warner make to combat DVD piracy in China?

Flexible pricing strategyOriginal DVD 120RMB VS. Pirate DVD 50RMB

FLEXIBLE PRICING STRATEGY...

BASIC VCD

10RMB

SILVERDVD

20-30RMB

GOLDDELUXE VERSION+ Bonus features>30RMB

CUSTOMER VALUE HIERARCHY

What moves did Warner make to combat DVD piracy in China?

Flexible pricing strategy

Reducing time lag

Similar moves made by Fox entertainment

http://articles.latimes.com/2006/nov/14/business/fi-news14

What moves did Warner make to combat DVD piracy in China?

Flexible pricing strategy

Reducing time lag

Greater convenience

SALES OUTLET

http://www.slate.com/id/2115921/

• Microsoft Windows faced similar difficulties in China concerning the distribution of pirated software

• However, instead of directly targeting the pirates themselves (those that produced and distributed the pirate software), Microsoft decided to focus attention on consumers

• In 2008, Microsoft introduced Genuine Advantage software to China, which identified pirate copies of Microsoft Windows and Office. After 60 minutes of use, a notification would pop-up in the corner of the screen and a black screen would appear. This would persist until a genuine version of the software was bought.

• Rather than raising lawsuits, as Microsoft normally would in the West, the company tried to crack down on the problem by moral persuasion of consumers, rather than directly competiting with DVD pirates themselves

However, a survey conducted on Chinese consumers found that 60% were hostile towards the new strategy.

Consumers complained that the problem was more deeprooted in the pricing strategy of Microsoft, and that setting the same prices as the West was unrealistica and unreasonable, considering the economic situation in China.

THE FUTURE FOR PIRACY IN CHINA?

Although DVD piracy is still rapant in China, increasing moves are being made to protect intellectual property rights (IPR).

e.g July 2006 – 100 Day Campaign Against Piracy launched, backed by 10 different government ministries and departments. It not only raised general awareness of the issue, but 58 million illegal publications were also seized during the 3 month campaign

Reform of the legal system on IPR protection in China and strengthened cooperation with foreign organisations are also good signs for the future.

QUESTIONS?

REFERENCES

Kotler, P., Keller, K. and Lu, T.H. (2009) Marketing Management in China, Singapore: Prentice Hall, pp. 106-108.

http://english.peopledaily.com.cn/200703/29/eng20070329_362038.html

http://www.china.org.cn/english/China/174728.htm

http://english.peopledaily.com.cn/200610/25/eng20061025_314817.html

http://english.peopledaily.com.cn/200703/20/eng20070320_359247.html

http://english.peopledaily.com.cn/200611/27/eng20061127_325640.html

http://english.peopledaily.com.cn/200703/29/eng20070329_362038.html

http://www.wired.com/epicenter/2008/10/microsoft-peeve/

http://www.china.org.cn/china/national/2008-10/17/content_16630207.htm