How can papers afford to give away DVDs?

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Millions of newspaper readers have been bulking out their DVD collections recently with free giveaways from the national press. But how can papers afford to be so generous?

A DVD of the 1999 Bafta-winning British comedy East is East sells for about £5 on the High Street. Alternatively, you could have picked up a copy at your local newsagents at the weekend, free with the £1.20 Guardian.

On the same day the Times was offering a DVD of the 1972 Liza Minnelli classic Cabaret (retail price about £15) while Independent readers could enjoy a free copy of the Oscar-winning Catherine Deneuve film Indochine, which would otherwise set them back about £8 in the shops.

A film buff might point out that these giveaway DVDs lack the extras - subtitles, deleted scenes, etc - included in the shop-bought versions.

But a free movie is a free movie. Which raises the question - how can papers afford it?

They can't, says media commentator Roy Greenslade, at least not if they want to make money. But unlike other areas of business, the newspaper game has never been about profit.

The great DVD giveaway is just the latest instalment in Fleet Street's endless turf war.

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"It's digital bingo," says Greenslade, referring to the period, 20 years ago, when tabloid editors employed prize-winning bingo games to woo new readers.

It was the Sunday papers which started giving away free CDs. The Saturdays followed and this week, the battle has spilled over from the weekend editions. The Sun is offering a series of BBC Comedy Greats on DVD, including Morecambe and Wise and the Two Ronnies.

The Daily Mail meanwhile, has a series of 12 - "collect them all" - free children's DVDs, including Superted, Rosie and Jim, and Fireman Sam.

Crucially, perhaps, these weekday offers are not "cover mounts" - ie the DVDs do not come with the paper - and rely on readers taking a voucher to a shop to redeem their free disc.

Offers of free DVDs are a proven sales winner, says Greenslade, but only in the very short-term.

Free paper with your DVD?

"They create only circulation spikes," he says. "Editors hope people will buy the paper for the DVD and become loyal readers, leading to long-term stability."

Retailers are worried that giveaways devalue their business

In fact, such offers seem to be creating an army of "newspaper tarts" - people who buy for the giveaway, rather than the paper itself.

"It's getting to the stage in a few years where you'll get a free newspaper with your CD or DVD," says Greenslade.

"It's a fight to the death, a case of last man standing. But newspapers are not about profit, they're about influence. So the owners will just plough in more and more money."

While papers may not be profiting from such offers, they're not losing as much as you might imagine.

The cost price of each disc could be as low as 16p-18p, says an industry source who asked not to be named. That includes the pressing of the disc, the cardboard wallet, artwork on the disc and the cover, and artistic royalties. It even includes a small payment to Philips, which claims a royalty on every DVD produced.

'Negative message'

CDs, he says, will cost marginally less.

"Knock-out 10,000 DVDs and you're looking at maybe 34p each; 100,000 at 25p each, half a million at 23p each. So when you get into the millions, which are what the tabloids sell, it's even less."

Last week we calculated 3m DVDs were sold in the UK, compared to 10m cover mounts given away with papers Gennaro Castaldo, HMV

Costs are trimmed at every corner, he says, and the discs were probably pressed during the summer, when factories are quieter but want to keep their presses running.

The artistic royalties for each film, meanwhile, will be signed up for "maybe £100,000 to £125,000", while the lightweight discs are "superb" for storage and transportation.

But not everyone is happy with the arrangement. HMV is one of several retailers worried that such giveaways will diminish the value of their business.

"DVDs should be aspirational but if you see them being tossed around it sends out a negative message," says HMV spokesman Gennaro Castaldo. "It devalues the medium in the minds of the public."

But doesn't the fact that a DVD can be made for as little as 16p suggest customers are being ripped off in the shops?

Mr Castaldo rejects it as a "facile argument". The cost of DVDs sold in shops reflects the "full costs of creating a film, distribution, marketing and selling it."

"But DVD prices have been coming down a lot recently."

In the mean time, Fleet Street's long-standing enmities are helping the canniest readers build extensive DVD libraries. Soon they'll be shouting 'full house!'

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Who, What, Why? is a on-going series which answers questions behind the headlines. If there is anything you would like answering, tell us using the form below.

How do they make monies...advertising at the beginning of the disc. After being suckered in to buying 'The Mail' (god help me what utter right wing tripe it was too) for the Bob the Builder DVD we were treated to over 5 minutes worth of advertising for the company that produces these shows. My two youngest were bored witless at Daddy's latest purchase. Perhaps they should stop giving away freebies and start concentrating on the content.
Rod Bell, Newton-Le-Willows, Merseyside, UK

I buy the Daily Mail & Sunday mail every day/weekend, so I regularly obtain my free copies of DVD's/CD's. Although the DVD do not include all the aspects of a DVD brought in a shop, the quality is still the same. But I do notice, that most of the Free DVD's are not current releases but films that are 10 years or more old, but at least most of the still make enjoyable viewing.
Jim Staynings, England

I bought a CD from a High Street chain the other day and they gave me a free newspaper with it.
Martin, Northern England

As an aspirational musician, things like this hurt the industry I want to be a part of. It's similar to pirating, as it takes the format away from the regular consumer paths, and is diverted and given away for a fraction of the cost. This in long-term will diminish an already unstable industry, with the shops being hit first, and the shockwaves being passed through to the artists and industry workers. Put DVDs and CDs back on the shelves
Brian, England

I read the Guardian. So, now I have East is East and something else that came the week before. To be honest I wish they would not contribute to the mountain of rubbish that comes through my letter box, what with all those loan and car insurance leaflets that fall out of the paper as you try and read it! I buy a paper to read the news and editorial, not to get a free DVD of a movie I saw years ago and have no wish to watch again. I expect it will end up as another coaster, along with the AOL disks that arrive all the time!
John Franklin, UK

I should be grateful if you would extend your fascinating report on how newspapers give away DVDs to a detailed analysis of the retail market for DVDs in the UK. Perhaps your friendly industry source could tell us much more. The quote from Gennaro Castaldo who says that DVDs should be "aspirational" and giveaways "devalues the medium" seems indicative of a retail market desperate to maintain high profit margins.
Selwyn St Leger, England

You haven't mentioned that you have to sit through 15 minutes of adverts that you can't skip in order to get to the film/cartoon!
Alison, UK

Mr Castaldo states the cost of a DVD reflects "full costs of creating a film, distribution, marketing and selling it." This is complete nonsense, any successful film will have recouped its entire production cost at the cinema. DVD's like CD's are vastly overpriced, as is proven by these offers from the newspapers.
Jon, UK

"DVDs should be aspirational" sorry - does this just mean expensive ? Hasn't HMV heard of competition?
Mark Parsons, UK

We had one of the children's DVDs at the weekend. They contain a *lot* of non-skippable advertising.
Dan, UK

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