Audio Video News

It's no secret that plenty of commodities cost more in Europe than they do in the United States. Gasoline, for example, is typically two to three times more expensive on the eastern side of the Atlantic.

This summer, it's not fuel that has drawn the ire of European consumers and spawned an inquiry by the European Union Commission, it's the price of DVDs and the film industry's policy of "regional coding" which allows films to be released on different dates in different parts of the world. On June 8, EU commissioners began an investigation of the major DVD distributors, which are based primarily in the US. "We have sent letters on Friday to the seven major distributors to find out whether the US system of 'regional coding' is used to artificially charge higher prices in the EU than would be the case without it," said commission spokesman Michael Tscherny.

During the formative days of DVD, the film industry determined that a system of regional codes, mirroring the way theatrical releases have traditionally debuted, would work well for films on disc. By preventing DVDs intended for one region from playing on machines sold in another region, the codes would keep movie fans from seeing a film on video before it had completed its theatrical run, executives reasoned. "It was a technological solution that gave us the ability to ensure that DVDs available in the US were not prematurely released before DVDs were released in the local country," said one film industry executive. The industry also hoped coding would prevent global trade in DVDs.

Established in 1996, the coding system defines the United States and Canada as Region 1; Western Europe, South Africa, and Japan as Region 2; Southeast Asia as Region 3; Australia, New Zealand, the Pacific islands, and Latin America as Region 4; Africa, Eastern Europe, Russia, and the former states of the Soviet Union as Region 5; and China as Region 6. The codes prevent discs purchased in one region from being played on machines purchased in another region—unless players have been modified to ignore the coding. Defeating region coding is already a common procedure performed by Australian technicians, whose government earlier this year determined that the coding system promotes price discrimination.

Many European consumer advocates agree and have complained to their governments that the film industry's copyright protection strategy promotes price gouging. DVD prices are typically $2 higher per title in Europe than they are in the US, where they sell for $15 to $25 each. At a June 11 conference in Stockholm, antitrust commissioner Mario Monti announced the launch of his organization's investigation into DVD pricing, saying that the film industry's concerns over intellectual property issues and control of distribution shouldn't be used as "a smoke screen to allow firms to maintain artificially high prices or to deny choice to consumers."

The European Commission sent letters to major DVD distributors seeking to open discussions about the problem. Among the recipients were Vivendi Universal, News Corp.'s 20th Century Fox, AOL Time Warner, Inc., Walt Disney Company, Metro-Goldwyn-Mayer, Sony Corporation, and Paramount Pictures, all of whom could face fines amounting to 10% of their annual European DVD sales if the commission determines a pattern of collusion. Disney executives announced that they would "cooperate fully" with the EU investigation; other companies had no immediate response.