Video makers turn the tables on pirates

MUMBAI: If you can’t beat piracy, learn to live with it. That’s how it has been with the players in the home video segment in the country so far. But, the situation is set to take a turn for the better.

In a move expected to instil fresh life into the estimated Rs 200-crore legitimate home video segment, one of the leading players has finally decided to take piracy head-on. The Rs 150-crore Ultra Group has come out with a competitive pricing strategy of Rs 45 for a VCD and Rs 69 for a DVD for approximately 300 titles.

While other players in the market, including Shemaroo, Eagle, Time and Gypsy are still undecided on their stance on this competitive pricing strategy, it has certainly left them thinking hard.

“We are closely evaluating the response to this move and will take a concrete decision on our pricing policy based on the observations and market feedback generated a few months down the line,” said Hiren Gada, vice-president, Shemaroo Video Pvt Ltd.
“Reducing prices looked to be the only solution to curb piracy and grow our business.

Though we had to cut down drastically on our profit margins, adopting this competitive pricing policy will certainly compensate with phenomenal growth in volumes thereby increasing the revenues,” said Sushil Kumar Agrawal, managing director and CEO, Ultra Group.

Piracy, which accounts for about 40% of the Rs 700-crore organised music industry, is several times over the organised market size in the home video segment.

Retailing at a negotiable price of Rs 50 for a VCD and between Rs 60 and Rs 100 for a DVD, the piracy market for home videos is currently pegged at over Rs 500 crore and growing rapidly.

In comparison, the legitimate home video market was worth Rs 225 crore in 2004-05, growing by about 30% from the 2003-04 levels.

“However, piracy took over in a big way and had a major impact on the home video segment thereafter, leading to negative growth,” asserts Gada. Shemaroo’s catalogue comprises 1,000 titles in Hindi, English and regional movie genres.

The manufacturing cost of a VCD is around Rs 20-25. However, depending on the title, they are retailed upwards from Rs 88 to Rs 150 and above. While trade margins are in the 25-30% range, the distributor has a margin of Rs 1-2 per copy.

“Taking a hit on our profitablility, we have maintained the distributor and retailer margins to the existing levels. Now it is the volume game that will be the deciding factor as far as growing our revenues is concerned,” informed Agarwal.

Agarwal is optimistic about the impact of his latest pricing initiative. With just about two weeks in the market, the strategy has started working to the company’s advantage already, he says, adding, “While I cannot disclose exact numbers, the response has been astounding. An interesting outcome of this strategy is that those retailing pirated copies have now started retailing the original ones.”

Driving growth for the VCD/DVD segment will be the strong 12 million Indian households owning a VCD player and 2 million households owning a DVD player (December 2005 figures). The growing demand for multi-media personal computers (PCs) will only add to the figures, feels Agarwal.

The Manufacturer’s Association of Information Technology pegged third quarter 2005 PC sales - desktops and laptops together - at over 11 lakh units with fourth quarter sales expected to be more buoyant.

Though the current offering is restricted to 300 titles, based on the market response, Ultra is eventually looking at bringing its entire 2,000 titles in this price bracket.

“We expect to get a clear picture in a few months. Thereafter, we will in a phased manner add 200 to 300 titles every 2 to 3 months and eventually offer our entire catalogue with this pricing in over a year.”