EU Looking at Studios’ DVD Prices for Europe

The European Commission is investigating whether Hollywood movie studios are charging consumers artificially high prices for movies sold on digital video discs in Europe.

The inquiry into DVD pricing practices by Vivendi Universal, News Corp.’s 20th Century Fox, AOL Time Warner Inc., Walt Disney Co., Metro-Goldwyn-Mayer Inc., Sony Corp. and Viacom Inc.’s Paramount Pictures was announced Monday by European Union Competition Commissioner Mario Monti.

The inquiry was triggered after “a significant number” of complaints from consumers, he said.

The studios and DVD player manufacturers have carved the world into six markets, and DVDs sold in Europe are encoded and can be used only on DVD players sold in Europe. So a consumer in Western Europe could not play a DVD purchased in the U.S., Latin America or Eastern Europe.

The price coding “system could be used as a smoke screen to allow [film production companies] to maintain artificially high prices or to deny choice to consumers,” Monti said Monday.

Studios refused to comment on the EU inquiry, with the exception of Disney, which released a statement saying the company would cooperate with the EU.

Consumer groups say Europeans must pay around $17 to $27 per DVD, while prices in the United States range between $15 and $25.

If found guilty, the studios would face fines of up to 10% of their annual DVD sales in Europe.

Separately, the Australian Competition and Consumer Commission last month found that the DVD coding system “is a mechanism to allow price discrimination.”

In the U.S., DVD sales were $3.4 billion last year, compared with videocassette sales of $7.4 billion, according to PricewaterhouseCoopers.

One Hollywood studio executive said the DVD pricing structure fluctuates from company to company.

Under the coding system introduced in 1996, the United States and Canada are in Region 1; Europe, South Africa and Japan are in Region 2; Region 3 covers Southeast Asia; Region 4 is Australia, New Zealand, the Pacific and Latin America; Region 5 is Africa, the Russian federation and Eastern Europe and Region 6 is China.

The geographic coding system was introduced because theatrical movie release dates and DVD and videocassette release dates vary depending on the country, the studio executive said.

“It was a technological solution that gave us the ability to ensure that DVDs available in the U.S. were not prematurely released before DVDs were released in the local country,” the executive said.

But in Australia, the government’s consumer watchdog group found that DVDs sold in the U.S. for about $20 sell for the equivalent of up to $26 in Australia.

The regional coding system has prompted a new industry in Australia in which technicians will modify DVDs, for $50 to $300 apiece, so the machines can play DVDs sold in different parts of the world, said Ross Jones, Australian Competition and Consumer Commissioner.

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Times wire services contributed to this report.