When the studios put out press releases like this one:
Warner Home Video said Wednesday it will begin selling low-priced DVDs of movies from two major Hollywood studios in China in a bid to curb widespread sales of pirated versions.
The DVDs, priced at 22 yuan (2.90 dollars) each, will be distributed in over 50 major Chinese cities beginning this month, according to the agreement that Warner Home Video signed with Paramount and Dreamworks Animation.
It can’t help but undermine any arguments they make about why I should pay $26.95 for it here in the US. And they do additional damage to their own reputation by subjecting intelligent customers to the inevitable conclusion that we’re being screwed. Americans are notorious comparison shoppers who hate getting a raw deal. Why should I pay $30 for a little plastic disk that they’re selling to someone else for $3?
The studios and the record labels still seem to think they’re operating in the global economy of the 1980s, when they could charge a premium for their products because of artificial scarcity and high trade barriers that effectively segmented geographic markets from one another. Pricing strategies based on these conditions worked 20 years ago because the studios could effectively force people to choose between two options: paying arbitrary prices for a legitimate copy vs. having no copy at all.
Those pricing strategies just don’t work anymore, because the assumptions they depend on are no longer true. There is now a third option that is widely available: you can make your own copies. The technology is not going away. In fact, there is a strong economic incentive for the computer industry to continue making it easier and cheaper for people to copy and store large files. When the studios attempt to impose artificial scarcity to prop up prices, people simply make their own copies. And as far as digital content is concerned, there are no barriers whatsoever to international trade. Customers aren’t stupid- we KNOW the assumptions behind the pricing are no longer valid, and we KNOW that a blank DVD costs just pennies to make, because people are selling them in the range of thirty cents each.
So when it becomes clear that (a) the studios are willing to sell the exact same product for 1/10th the price, simply because people who live somewhere else won’t pay $30 for it, and (b) the justification for this decision is, essentially: “At $30, they’d rather copy it themselves than pay for our copies, so we’re going to try charging them less to see if we can meet the demand curve,” the only logical conclusion is that in the new global market for copyrighted material, given a fixed demand, increased piracy results in lower prices for legitimate copies.
Maybe the studios need a new PR firm, becuase somehow I don’t think that’s the message they are trying to get across.
