There’s been a lot of talk about the suffering of the Hong Kong film industry in recent years. But the video/DVD industry has been suffering too, for different reasons. This resulted in the passing of the Copyright (Amendment) Ordinance 2007. This introduced some new rental licensing schemes which came into effect on 1 February 2008. But can this really help to resolve the problems of the home video market?
Rental licensing is not new to Hong Kong. In the 1980s and 1990s audiences could rent a movie in VHS or Laserdisc format for around US$1 to US$2. In the early 1990s, there were even some large video rental chains like KPS with a wide variety of titles. These stores operated under a rental licensing scheme whereby the store would have a licensing agreement with the home video distributor, and also buy the product at an agreed “rental” price.
But in the late 1990s, with the release of VCD (Video Compact Discs) and DVDs, and their relative cheapness to combat piracy, the video rental industry suffered greatly. It was possible to buy a VCD for only US$ 3-5. So why rent? The main home video rental chain went bust, probably as a result.
But the rental industry did not die. Instead, it invented a new way of operating. Most of the rental stores started to operate independently by buying VCDs and DVDs on the open market and then renting them. There were more than 400 stores all over Hong Kong - that meant they were almost everywhere. With the relative low cost of a VCD/DVD purchase, they could rent the video for as little as US$ 0.80 for a VCD and US$ 1.20 for a DVD. The low cost model made the rental industry hot again.
Unfortunately, this way of doing things did not benefit the home video distribution companies. The rental stores bought the retail VCDs/DVDs and rented them, so the distribution companies could not make a profit after the initial sale. So the home video distributors fought hard to introduce a rental license on VCD/DVD rentals.
Under the rental licensing system, VCD/DVD rental stores who would like to rent VCD/DVD to customers must pay annual fees to the home video distribution company at around US$130-200 per year. The store has to purchase the “Rental DVD/VCD”. The cost for “Rental VCDs” are normally twice of that for retail VCD and the cost for “Rental DVDs” are normally 50% to 100% more than that for retail DVD.
The price differences can vary for different grades of movies and TV dramas. To help the rental stores, home video distributors are trying to introduce a time gap between release of rental and retail VCD/DVDs so that there is a short period for stores to enjoy the ‘sole rental’ rights. Home video companies hope this will improve their business.
Rental stores, however, are very negative about the rental licensing system. They are concerned about impact of the high cost of registration fees as well as the price of rental DVD and VCDs. There has been an increase in rental costs for those titles under the rental licensing system. The rental price has increased by 50% to 100% for the public. Rental stores are afraid the increase on rental costs will result in the sharp drop of rentals among audiences - and mean a new round of store closures like in the late 1990s.
The rental licensing system showed the old fashioned mindset of the home video industry in Hong Kong. The world has changed with the Internet, which has brought online rental opportunities. There are some successful online distribution models like the Apple iTunes services. The online rental or pay-per-view system has developed in other Asian countries like South Korea and mainland China. But not in Hong Kong.
This outdated business model encouraged unauthorized downloading of movies over the Internet in Hong Kong. Some audiences who like to watch their movies online or on portable devices failed to find handy legal sources of purchase. So they used illegal methods of downloading. That’s not good for anyone. The real solution to the problems of the home video market is for distributors to embrace the digital age.
Ryan Law