With the serious drop in DVD-disc and DVD-player manufacturing costs over the past few years, it has come to the stage where both DVD-discs and players are cheaper to manufacture than its VHS counterparts. However, despite the cheaper replication costs for DVDs, most blockbuster hits still cost up to twice the price on DVD compared with VHS. In fact, it only costs about £0.42 to manufacture a DVD. Unlike VHS, DVDs
support multiple languages so manufacturers can save even more by replicating
the same DVD containing multiple soundtracks for multiple countries.
While consumer groups are complaining about 'rip-off' prices on DVDs, the movie industry have a different story to say. They claim that DVDs are charged more since they contain features not available on most VHS versions such as interviews, trailers, Dolby digital/DTS sound tracks, director's comments and so on thus making the DVD better value for your money. Even the menu design and disc organisation adds to the cost of DVD. Britain's best DVD sellers said that if their customers thought DVDs were a rip-off, they would not have turned out to be so popular. They also say that DVD sales also help recoup the cost of making the film.
Despite what the movie industry and retailers say, a director from a DVD replication plant said that despite all these extra features and initial development costs with DVDs, it still works out marginally cheaper than VHS once replication costs are taken into account. The
leading industry analyst Jessica Reif-Cohen found that the studios make a 66% profit margin on DVDs compared with only 45% with VHS tapes once everything is taken into account.
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The latest blockbuster can cost up to £20 on DVD, as much as double the cost of the video version, even though old-fashioned cassettes cost more to make. There has been an explosion in DVD sales over the past year, meaning each disc costs as little as 42 pence to manufacture. So far, however, there is little sign of the industry cutting its margins. The controversy is a re-run of the dispute over CD prices in the 1980s, when retailers charged a premium for the new format despite the fact it was cheaper to produce. The DVD, or Digital Versatile Disc, has become the biggest technology hit of recent years, with almost half (45%) of all households with a TV owning a DVD player. Some 145 million discs were sold last year in the UK, double the number recorded in the previous year. Meanwhile, the market for video cassettes is shrinking, with sales down to 60 million last year. An investigation has already been conducted into why DVDs are more expensive in the UK than the United States, where the discs typically cost 20% less. At the time the European Commission examined the issue in 2001, DVDs cost around £3 more to make than video tapes. Now attention is focusing on why consumers are charged so much for DVDs, particularly as manufacturing costs have tumbled. Companies also save money by marketing identical DVDs to different countries, because the technology allows soundtracks for different languages to be sold on the same disc. New figures produced by leading industry analyst Jessica Reif-Cohen, of Merrill Lynch, found studios make an average 66% profit margin on the DVD, compared with just 45% on the video cassette, even when extras such as interviews, trailers, directors' commentaries and out-takes are taken into account. In addition, many videos now include some of the extras which are normally the preserve of DVDs. Read the full story here. |
I find that the studios are using a similar approach to how Microsoft markets its software. The main reason consumers end up paying out these high prices is due to the lack of competition, much like CD vs Cassette Tape pricing in the 90's. Most consumers who
have a region locked DVD player cannot even shop around outside their region such as from online stores or while abroad in a country with a different region code.
Feel free to discuss and read more about the DVD optical disc format on our Media Forum.
Source: Scotland on Sunday
