Anger over great British DVD 'rip-off'

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.

Andrew Roberts, director of the Northampton-based Discus Group, which manufactures and produces both videos and DVDs, said: "The replication of DVDs is a lot quicker and cheaper than DVD ‘burning’ which people do on home computers, and a lot faster than making video cassettes.

"The main cost is in the ‘mastering’ of the disc, which includes computer menus and organisation of the data. When that is taken into account, DVDs are still marginally cheaper than videos." He added that companies even save money through such simple considerations as DVDs being smaller than video cassettes, meaning firms save on storage space in their warehouses.

Julia Clarke, spokeswoman for the Consumers’ Association Scotland, said: "The discs are far too expensive, and there is no reason for them to be so much dearer than videos."

Chris Jenkins, editor of Total DVD Magazine, added: "Of course they are too expensive. The mark-up is not justified unless you are prepared to accept the excuse they are still attempting to recoup the costs of developing a new medium, which I don’t think is credible.

"They charge whatever they think they can get away with."

Industry analysts and retailers last night denied DVDs were being sold at ‘rip-off’ prices.

A spokesman for HMV, one of Britain’s biggest sellers of DVDs, said: "DVDs sell extremely well, and I don’t think they would if consumers thought they were being sold at an excessive price. Consumers are getting more for their money. The DVD is a superior product and customers are voting with their feet."

Lavinia Ceary, the director general of the British Video Association, which represents distributors, said: "The viewer is getting a lot more for their money [with DVD] and these things cost extra.

"DVDs are increasingly the major way to recoup the costs of making the actual film, which is obviously a lot of money. And the DVD format has been astonishingly popular."

Analysts point out that while the typical new-release DVD is pricier than videos, many stores run deals which offer cut-price Hollywood hits. Some of the deals available last week included Enemy of the State, starring Will Smith, and Sleepless in Seattle, starring Tom Hanks, each for 4.99. The Humphrey Bogart classic Casablanca was available for 5.99.

Alan Flitcroft, a media and entertainment industry analyst with Ernst and Young, said:

"The take-up has been astonishing - faster than mobile phones, CDs, video recorders or colour television. I think that makes it difficult to argue that the format is overpriced."

While many film fans are only now adjusting to the shiny new reality of DVDs, the industry is already pondering what might be the next step for movie technology. Possibilities include ultra high-capacity DVDs, which could include several movies on a single disc, more soundtracks, and super high-definition images that could be viewed from an array of angles.

How to beat the UK's high prices

BUY a multi-region DVD player which will allow you to use DVDs from the United States and Asia, which can be much cheaper than those from the UK. Don’t buy a Region Two (European DVDs only) model.

Discs from America are typically 20% cheaper than the UK, and also come out earlier. The new film The Cat in the Hat, starring Mike Myers, pictured, was in American cinemas last Christmas and released on DVD there earlier this month, where it could be bought for 12, but has only recently been shown in British cinemas.

Shop around ruthlessly, and if you can bear the wait for your favourite film you can save pounds. DVDs can fall to below 10 after just four months. Originally released last September, the Jennifer Lopez film Maid in Manhattan now costs just 7.99.

Even if you have a Region-Two player, all is not lost. Films bought in mainland Europe can be over 25% cheaper than those in the UK.