Chinese and Indian studios could drop DVD prices because, unlike the Hollywood studios, they never reset production budgets and revenue projections around the DVD bubble—around the very recent assumption that studios could double profits through DVD sales. Chinese and Indian companies could treat home video (and the DVD in particular) as a market to build rather than protect. For the global studios, the rational strategy was to protect the profit centers—the high-income, high-priced markets—rather than engage in complex forms of price discrimination that could undermine the perceived value of the DVD in the US and Europe. For domestic Chinese and Indian studios, the case for building domestic markets through lower prices was much clearer. Such strategies didn’t eliminate piracy, of course, but did creating a basis for rapid growth and gradual legalization of the market.There are similarities between Chinese and Indian studios' behavior and Amazon's as a disruptive innovator with no existing business to protect versus the big American studios and publishers--also plenty of differences, of course, but protecting "the perceived value" of the physical book was an important consideration for the big publishers trying to figure out what to do with ebooks.
Saturday, July 13, 2013
China, DVDs, and antitrust
This post by Joe Karaganis on China, media piracy, and business models made me think of the Apple ebooks case: