In an attempt to make headway against rampant film piracy, Warner Bros. will distribute newly released films online in China.
The studio struck a deal with Union Voole Technology in China to offer new movies, as well as those that have never been seen in Chinese theaters, at rental prices ranging from 60 cents to $1. The inexpensive video-on-demand service seeks to entice China's estimated 253 million Internet users to pay for Hollywood fare rather than download illicit copies.
"Every major American company has tried to figure out and crack the nut in China," said Kevin Tsujihara, president of Warner Bros. Home Entertainment Group. "We believe that we have an opportunity, through digital distribution," to solve that problem.
The rapid growth of Internet access in China presents a way for the studios to establish a legitimate business in China, where an industry study estimated $2.7 billion in lost potential sales due to pirated DVDs in 2005, the most recent year for which data are available. About 93% of the movies sold in China are counterfeit -- black-market discs sold in stores and by legions of roaming vendors who peddle them at subway stations and from their bicycles.
Budding services such as Beijing-based Voole, whose launch date has not been announced, seek to give Hollywood a chance to beat the pirates by making films quickly available online.
"Let's take a crack at creating a real digital market there," Tsujihara said.
Voole also has acquired distribution rights from Warner and Sony Pictures Television International for an online subscription service launching Nov. 12 that will charge a flat rate for unlimited online viewing.
"We believe that Voole is committed to providing the [Chinese] with legitimate content from the major Hollywood studios," Jiande Chen, chief representative of Sony Pictures Entertainment China Inc., said in an e-mail.
Industry observers note a change in the Chinese market since the Beijing Olympics. New-media companies are bursting onto the scene and gaining traction in the marketplace. Even popular pirate sites, such as Xunlei, are working to purge unauthorized content and replace it with licensed movies and television shows, as investors urge the companies to improve revenue and move toward a public stock offering, according to people familiar with the situation.
David Wertheimer, who heads the Entertainment Technology Center at USC, applauded the studios for experimenting with new pricing, release windows and technologies to stem piracy.
"Warner Bros. recently announced day-and-date digital distribution in Korea -- it's an experiment to see how consumers will react, whether it will help stem some of the piracy, and it's a gutsy move. It breaks many of the rules," Wertheimer said in response to an e-mailed question.
"Time will tell how it worked, but one thing that heartens me is that the studios are not doing what the music industry did; instead they are out there taking risks," Wertheimer wrote.