Movie titles to cost more
Wednesday, 12th March, 2008
You may have to pay a little more for the DVD and VCD. After a short spell of price cuts, home entertainment majors have deeded to change their pricing tack. Now, they will hike prices, despite the competition.

Less than a year ago, the entry of Moser Baer triggered a dramatic cut in DVD/VCD prices. While the low-price strategy of Moser Baer pulled the average price range in the market from Rs 250-400 to the Rs 100-150 mark, players have realized that this model is not viable. In the last six months, VCD/DVD prices for new Hindi titles have gone up. Even as players like T-Series, Shemaroo and others dropped prices significantly, there was surge in volumes.
Tighter margins and high acquisition rights for titles are now driving home entertainment players to revisit the old strategy of higher prices. Shemaroo dropped its rates last year by 30% in the hope that volumes would make up the gap. However to ensure same levels of returns, we were looking at volumes going up by 2.5 times. That has dearly not happened, and hence for all new Hindi titles Shemaroo has deeded to look at higher price points.

Today, VCDs of recent Hindi titles such as Welcome, OSO, Mithya, Gandhi, Cash and Bhool Bhulaiyaa are priced at a higher range of Rs 145 -160. Moser Baer, the traditional CD maker, had ventured into the home video market acquiring rights of Bollywood movies in hordes.
It started selling VCDs at Rs 28, when others offered it for Rs 100-200. It sold DVDs at as low as Rs 34. In fact, T-Series tweaked its pricing, bringing it down to Rs 45, making the difference between the two marginal. Its the passion that drives the sales, and is not the same way an FMCG product sells. Only through high-end pricing can one justify the price for acquiring the title. The Indian market in the entertainment space it is not as price sensitive as other sectors.
The home industry is clear that prices for hit movies will stabilize at the Rs 400 - 500 mark and at around Rs 200 for a DVD and VCD respectively. An average movie on the other hand will be priced at Rs 200 - 300 for a DVD and Rs 160 - 200 for a VCD.Since its debut price of Rs 28 and Rs 34 for a VCD and DVD respectively, even Moser Baer has slightly increased the price range. Its VCD prices are today priced between Rs 28 and 34 while DVDs are priced at Rs 49. Movies like Jab We Met, Halla Bol and Strangers are priced at Rs 34 and Rs 49 for VCDs and DVDs respectively.

Typically, home video rights are sold for a period of five years. After that it is again auctioned. So, the players need to break even and make a decent profit during that period. As per reports, video rights of movies like Welcome and OSO were sold at Rs 1.5 - 2 crore. Thus, the challenge is to do a million plus copies to ensure profitability.Say, a home video right is sold for Rs 1 crore. At a price of Rs45 a VCD, margins aren’t more than Rs 15 a copy sold. This is because of 30% retail margin (around Rs 15) and another Rs. 12-15 for making the CD as well its packaging. By this logic, the company needs to sell around 6, 70,000 copies just to break -even. And to make a decent profit, at least a million copies or more over a span of five years. And that is increasingly turning out to be a tough proposition. Also today the Indian market is tilted towards the VCD market, where the margins are wafer thin. Its 80:20 in terms of volumes in favour of VCD market.

