The Distributor Stranglehold
For too long distributors have used their power to gain control over the DVD market. They have instilled outdated business practic...
There is no doubt digital video is fast becoming the consumer choice for home cinema. Superior sound and video quality, extra-features on top of the movie and its appeal to collectors are just some of the reasons DVD continues to grow today. Before its third birthday in March 2000, Digital Video players and discs had become the most successful consumer electronics product ever, surpassing videotape, laserdiscs and compact discs. For this reason, it is imperative that the problems associated with the birth of a new form of home cinema be eradicated, including those relating to the distribution of digital video and its effect on consumers.
Distribution processes have caused many problems for digital media, particularly DVDs. Ask even the most uneducated Digital Video user their opinion on the single most frustrating concept about DVDs and they will undoubtedly mention the much-maligned method of Region Coding. The International DVD consortium (comprising of nine companies including Philips, Sony and Toshiba, the pioneer of Digital Video) got together to devise a plan so that the distribution of DVDs could be harnessed and controlled. This organisation realised the fact that, due to different worldwide release dates for films in cinemas, consumers could purchase discs from overseas before the film had even started its theatrical run in Australia. One example is the movie Chicken Run, which was released on DVD months before it commenced in Australian cinemas. For this reason they developed Region Coding, a process in which players and discs are allocated codes depending on where in the world they are intended to be sold. The principle of Region Coding is that the player checks the disc for its region code, then either plays or rejects the film, depending on whether the codes match between disc and player. Australia sits at Region 4 along with New Zealand and South America, with North America being Region 1 and Europe allocated Region 2.
The main problem of Region Coding is that it restricts consumers in their choice of product, often forcing them to buy an inferior product locally because the superior product located overseas will not play on their machine. As Dean McIntosh states, "modern-day consumers, and DVD enthusiasts in particular, are far more concerned with getting the best value for their dollar and are less likely to accept inferior products". This proves the fact that the current distribution methods can not stand up to the developments in digital media, with distributors now earning the wrath of consumers worldwide if they release an inferior film in their home country, or do not even make it available at all.
Placing a region code on a film that finished its theatrical run over three years ago is futile, again restricting customers in their choice for no apparent reason than for the distributors to have total control over the market. Some films look destined never to be released in particular countries, making Region Coding prohibitively frustrating. This is not to mention the problems associated with consumers moving to another country, which is becoming increasingly commonplace and relatively easy in the current global climate.
There would be no problem with region coding if all regions were treated equally. There are too many cases where better discs (either uncut, visually superior or feature-laden) are available elsewhere, adding to the consumer's frustration. The Age recently ran an article entitled, "Why our discs aren't up to scratch", pointing out that Australia is getting a particularly raw deal on behalf of the film companies and distributors. The Region 1 version of A Bug's Life is beautifully packaged into a Collector's Edition, complete with an extra disc of valuable features; the Region 4 version with only the Pixar featurette as an added extra. Fight Club is missing a total of three commentaries in the Region 4 version, and not for the lazy excuse of PAL transfers taking up more space on the disc than NTSC, which is frequently offered by distributors in response to public complaint. The fact that DVD is a collectors medium makes the variations between regions all the more outrageous. Are Australians less likely to collect than their American counterparts? Do we care less about quality than those in the United States or Europe? Surely not.
The argument remains that, as international distribution is handled by a variety of different companies, there will be discrepancies in the content of discs. For example, Columbia Tristar is responsible for the distribution of many Universal titles in Australia, even though the decision about when to release a film and the disc's contents are totally up to Universal in the States. The rights to extra features are held by different studios so a country's distributor may not have the ability to place various copyrighted material on their discs. This is almost a flashing green light for the case against region coding. Why not make one version of a film, with the best available extra features, rather than releasing numerous versions of the discs with discrepancies in visual quality and extra features? Hence the ever-increasing push towards multi-zone DVD players.
Multi-zone players work directly against the region coding system. They can bypass the disc's code and play DVDs from anywhere in the world, rendering the region codes useless. Managing Director of Siren Entertainment, Nigel Rennard, points out that "as long as there are titles available in another region, you will have modified machines".
Such is the pull of the American DVD market, that multi-zone enthusiasts have flooded internet shopping sites with orders of DVDs, building up their collections with the best products available in R1 and, in many cases, the world. Subsequently, DVD players and the internet have made a mockery of the region coding system, proving that these measures were destined to be challenged by the power of the DVD consumer. Technology has already started to make region coding grossly outdated. It is now "just as easy to purchase a DVD from the USA as it is to drive down to the local bricks and mortar DVD retailer." Even the low Australian dollar hasn't deterred consumers from importing DVDs. If having pay up to seventy dollars to buy movies in their most complete form doesn't discourage the use of multi-zone players and importation, then nothing will. This highlights the fact that the collectability of Digital Video has reached new heights and is now a major factor in the consumer's quest for the best possible product; quickly.
The argument arose that allowing consumers to import DVD products from overseas will harm the local market. The only reason importing DVDs will have a negative impact on sales in our own country is if the Australian product is markedly inferior to those overseas. If distributors want to boost the market in Australia they should make a commitment to release their DVD titles with the same features, sound and video quality as those in the United States.
Put into context, the same debates surrounded the restrictions on parallel importation of Compact Discs. It was found by the Australian Consumers Association that Australia was paying around $6.00 more than consumers of popular music overseas. Customers have reaped the benefits of the Government's decision to lift the ban on parallel importation of CDs, with local prices falling as a result of the threat of consumers buying abroad. In relation to DVD, this is not made possible due to region coding unless you have a multi-zone player. This proves again that the distributors want to continue their stranglehold on the market by manipulating the choice of products for consumers. Region 4 DVD magazine DVD Now argued that "if a CD is not available in Australia, or likely to be released here some time in the future, there's no compelling reason why it should not be imported from overseas" so the same should apply to Digital Video.
Region Coding and subsequent restrictive technologies placed on Digital Video blatantly border on being anti-competitive. It allows distributors to charge higher prices in a market where there is less competition, again effecting the growth of digital media by pushing the price out of the reach of many consumers.
In this age of digitisation, the current practice of challenging anti-competitive practices will become increasingly relevant. The Australian Competition & Consumer Commission is currently investigating whether the process of Region Coding is anti-competitive in that it enables movie studios to charge higher prices in a country where there is less competition, giving a helping hand to the Region 1 market. It also enables the distributors to determine when they will release a title and what extra features the disc will contain. This investigation could lead to "the world's first legal challenge to the Regional Playback Control system". In their initial report, entitled Consumers In The Dark Over Imports, the ACCC outlines the fact that many consumers still are yet to realise the full extent of region coding and how it will affect discs purchased overseas. They argue that while the PAL and NTSC formats "gave rise to discrepancies between US and Australian television standards and made parallel importation of videos impractical……..Region Coding is an artificial barrier that limits competition". DVD has gone way beyond the simple PAL versus NTSC divide, moving distributors into a far more deliberate way of gaining control.
Rental windows are another example of distributors milking their power for all it is worth, greatly affecting the consumer DVD market in the process. It allows for the distributors to put a featureless disc on the rental shelves, often in Pan & Scan format, then subsequently releasing the sell-through disc months later, complete with extras and a widescreen transfer. In effect, they are taking "two bites at the cherry". There is an amount of distrust already in the distributors' ability to put out the best possible product in Region 4. All the rental window does is drive consumers to pick up their DVDs from overseas, instead of waiting for a product that may or may not include the same features as its international counterpart. And the subject of the Pan & Scan transfer cannot be ignored either, as it is having a negative affect on educating consumers on the value of those "little black bars". Dean McIntosh puts it bluntly, stating "explaining to the average user that the image they see in theatres is not the same square shape of their TV screen is a difficult enough exercise without the rental-window supporting distributors pandering to their ignorance".
DVD's collectability cannot be ignored. Director Steven Sodobergh describes it as the "best film school in the world", with users now treated to various pieces of information on the making of the film, among a myriad of other features. Restricting users by way of rental windows, on top of Region Coding, serves only to again undermine the power of the consumer. It works against the concept of keeping the DVD sales within Australia, as collectors and even regular DVD enthusiasts are now turning to overseas outlets to buy their product now instead of six months down the track. Using the rental window is merely a greedy way for distributors and rental outlets to make more profits.
The most clear and logical solution stems from the distribution of films to cinemas in the digital age. With digitisation enabling large files to be distributed by a computer as information, we could be in for a cinematic revolution. Movie studios can send their films to cinemas directly as large packets of data, instead of using the current "hand-me-down" system. No longer will there need to be staggered release dates, as the sharing of film reels between countries won't be required. The studios can also then sell their films directly to the consumer, making the money on the disc they produced. As Dean McIntosh states, "the studios want to have complete control over their multi-million dollar assets, including the distribution of their films". In a particularly Utopian model, but one that would definitely benefit both the consumer and studio, worldwide release dates for films would become the norm. The film studios could then open up their own stores where customers can order a DVD from a large catalogue and have it pressed on site while they wait. This will spell the end of manipulative distributors, Region Coding and staggered release dates for cinemas. Digital distribution to cinemas will be a major issue in the future and will greatly affect the dissemination of media, including Digital Video Discs.
In this age of cheap and easy communication and travel there is constant talk of globalisation and lowering government-imposed barriers to free trade. Are they to be replaced by corporate-imposed barriers? This question is being answered in the form of digital video. The corporate barriers are being put up in order to manipulate markets the world over. While there is now little division in terms of geographical location and communications, the technical barriers are now being used to alienate customers and divide the world once more. Converging digital technologies are already forcing their way into consumer electronics, so now is the best time to deal with the inherent problems associated with the distribution of digital media. With products such as WebDVD just around the corner it is becoming increasingly important for the distributors to acknowledge their errors of the past and change them in time for the new technologies to be introduced smoothly in the future. Convergence is a driving force behind the move towards globalisation but we can't reach that goal until the technical barriers put in place by distributors and the like are removed.
With DVD still in its relative infancy, it will be interesting to see where the issues and problems associated with distribution will lead, hinging largely on the inevitable decision to distribute films to cinemas in digital form. It is obvious that issues such as Region Coding and rental windows made sense to the film companies and distributors at the time, but they were operating on outdated business practices and underestimating the power of the consumer. Hopefully with time it will be evident that these issues are far too restrictive to remain and will be overtaken by the customer's demand for the best possible products in the least possible time, regardless of location.
Editorial by Pete Roberts
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