Beating movie pirates at their own game
A home entertainment company believes it has come up with the perfect way to tackle piracy – selling genuine videos and DVDs for less than what counterfeiters charge for fakes.
And Moser Baer has every reason to hope it is right as it has invested $65 million (Dh239m) in the Indian home video market alone.
It is a sector that has traditionally been rife with piracy. Before Moser Baer's launch in April 2007, pirated copies of a movie would flood the streets in cities across India three days after its cinema release.
Genuine VCDs and DVDs cost Rs150 (Dh11.50) and Rs300 respectively, with pirated knock-offs selling at Rs30 and Rs50.
Moser Baer revolutionised the industry – and stunned the pirates – by offering its titles at Rs30 on VCD and Rs39 on DVD.
This weekend marks the company's first foray into the international market. It is launching the Malayalam film Cycle in the UAE – and is repeating its cut-price strategy by charging just Dh10 for both VCD and DVD formats, compared with the normal Dh25.
Moser Baer's entry into the UAE market will be closely monitored by movie producers around the globe. It says its eventual goal is to invade Hollywood and as such has set a target of establishing a truly international footprint by 2011.
"We are confident the pricing model will work in the UAE too," said Moser Baer Chief Operating Officer G Dhananjayan.
"This is the start of our international programme and is a crucial stage for us. As we grow, the next logical step will be picking up international rights for Bollywood films and eventually entering Hollywood."
Moser Baer's decision to enter the Indian video market triggered considerable speculation as the industry was already shrinking into oblivion. In a country where regulation is abysmal and piracy the natural by-product, filmmakers battled with losses up to 60 per cent of box office revenue – and 90 per cent in the home video market.
The low-cost approach helped Moser Baer rapidly redefine the Indian home video industry. Acquisitions of smaller players and their catalogues and growing confidence among film producers saw the company dominate 2008 with a 30 per cent market share of new releases and a near-total monopoly of classic films.
Filmmakers were quick to cash in on the hunger for titles and within months, the wafer-thin cases of Moser Baer films packed shelves in the country's shops. Phone booth operators in rural areas proudly displayed the cases and domination was complete.
"It was a very well-devised strategy and well executed," said Dhananjayan. "In Dubai and many other markets, Indian products are full of piracy. The law is very strict on Hollywood films but for Indian films piracy is rampant. Even the counterfeiters have stepped up their game – pirated copies now hit the market on the same day as a film's theatrical release."
Dhananjayan cited the example of Ghajini, a big-budget production starring Aamir Khan that was released last weekend. He said movie bosses had distributed prints for the international release a week earlier and the process had been infiltrated.
"Given the Indian box office returns of $2 billion, the home video market should stand at a minimum of $1bn, considering the international average. However, today's market is barely worth $200m so there is a tremendous market to capitalise on – provided we are able to counter piracy and shunt it out," he said.
The pirates' greatest period of opportunity is the six to eight weeks between theatrical release and the appearance of the genuine home video version in stores.
"As a result, only those who like to have a high-quality, original copy of a film they have already seen buy the legitimate discs," added Dhananjayan.
Moser Baer's business model, based on volume and combined with low pricing and easy availability, has enabled it to remain in profit.
"Although I'm not at liberty to disclose our figures I can tell you that the company's first year turnover exceeded $50m and that our pricing factors in sustainable profitability."
Bollywood, the world's largest film industry, churned out more than 100 Hindi films last year, with 30 per cent of the titles going to Moser Baer for home distribution. While there is growing interest in new titles among collectors, Dhananjayan said that the business relied heavily on its older catalogue.
In the past 14 months the company has acquired Bombino, Ultra, Indus, Captain, UTV's home video label and a dozen Sony titles.
"We want to dominate the market," he said. "These companies had all given up, they were resigned to their fate because of piracy. But we believe very strongly in our model and will continue to be bullish about it."
Cult Hindi classics such as Sholay and long-running Indian mythology television serials such as Ramayana and Mahabharata have been the breadwinners, contributing 60 per cent of turnover.
"Obviously, new films are the drivers, they excite the market and send fans to the stores. But that is entirely dependent on box office reviews and the results of these films. Films that have proven themselves, however, are definite profit earners," he said.
Today, Moser Baer has 10,000 titles in 11 Indian languages. The company has strategically bought rights to industry blockbusters as well as a number of smaller, independent films.
The fact that these rights do not come cheap demonstrates the company's determination and long-term commitment. Home video rights range from $650,000 to $100,000 for each movie and the company plans to invest an additional $1m a year to help fund a government-backed agency to combat piracy.
"Four leading players have come together so far to set up a team led by former police commissioners to hunt down pirates and take them to task. Every year $6m will be pumped into this campaign and as more players join, the costs to individual members will fall. We are committed and we will win this war."
Dhananjayan regretted the fact that consumers felt little guilt about supporting piracy and said the industry would also focus on raising awareness through advertising. A new price war has begun in India – pirated DVDs are now available for just Rs25 and, although they are lacking in quality, they are still lapped up by the rupee-conscious population.
In a further step, Moser Baer plans to launch its products with copy-protection software, which has surprisingly been absent until now.
This will affect disc pricing by five to six per cent. Since a further decrease in product pricing is no longer viable, Indian companies will be forced to pin their hopes on anti-piracy agencies.
John Chahine, General Manager of UAE-based distributor Italia Films, said if Hollywood was able to replicate Baer's strategy of bulk production, it would be a solution to piracy.
"Major Hollywood studios like Disney and Warner Bros have begun approaching this solution," he said.
"With a single DVD bulk-produced for all regions, they have been able to bring down the price to Dh30 within a few months. However, there are more than 100 independent studios in America and Europe that sell rights to different territories.
"This severely increases the manufacturing cost of each DVD. As a result, they cannot offer originals at counterfeit prices. If these independent studios were able to unify production, it would completely wipe out piracy," he said.
The international strategy
The Motion Picture Association of America and its international counterpart, the Motion Picture Association, have identified a five-point plan to counter piracy. This comprises investing in security, legislation, a hotline, public education and measures through technology.
American and international movie studios have made large investments in upgrading movie print security. They also employ security personnel to conduct random bag checks at theatrical screenings, in an attempt to crackdown on camcorder piracy.
Work is in progress on the development of three different technologies to reduce the effectiveness of camcorder pirates. Camcorder jamming technology will disable camcorders from recording films on theatre screens. New forensic watermarking will enable investigators and law enforcement agencies to identify the exact time, date and auditorium of a screening where a camcorder copy was made, while an advanced camcorder detection system is also being built to alert theatre owners of individuals making recordings within the auditorium.
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