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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