Stores in pounds 5m video disc rip-off

DIXONS STORE Group and HMV, two of Britain's biggest store chains, have reaped up to pounds 5m from consumers by exploiting their ignorance to inflate prices of the new CD-like digital video discs (DVDs).

Prices of DVDs, which can hold an entire feature film on a CD-sized disc, are being marked up by as much as pounds 5 above the makers' suggested retail prices in Dixons, Currys, PC World and HMV stores around the UK. Discs available elsewhere for about pounds 15 are being sold for almost pounds 20 or more.

But the price hikes are not a mistake: they are a deliberate policy by the store groups, which are taking advantage of the restricted number of DVD retailers, and buyers' uncertainty about the "market price", to make early profits.

A Dixons spokeswoman told the IoS: "In general, we don't discuss our pricing policy. We price according to what we think the market can bear."

Gennaro Castaldo, HMV's PR manager, said: "Our prices may be higher than others, but that's because we try to have a bigger catalogue. We never follow suggested prices."

But the average buyer will not know how much a DVD should cost. Though DVD players were introduced to the UK only in April, they have proved a roaring success, with roughly 100,000 sold already. But the three main film distributors have maintained different pricing levels for their films on DVD, of pounds 15.99, pounds 19.99 and pounds 21.99. The chain stores have chosen to shift prices of DVDs from the two lower pricing levels upwards to the next.

For the stores, it means an unexpected bounty. Surveys show that each buyer purchases an average of 10 DVDs: if all those were bought at Dixons or HMV, it would mean that the companies have profited by about pounds 50 per player sold, or pounds 5m, from consumers' naivety.

It has left DVD manufacturers furious but powerless, because the abolition of resale price maintenance (RPM) in 1997 means that they cannot determine what price their products are retailed for.

"It's sheer profiteering," said Nick Thomas, a spokesman for the DVD Committee, which represents the makers of players and discs. "They are entitled to do it, but our advice to consumers is to shop around.

"The ironic thing is that the abolition of RPM was meant to mean that prices came down. But it actually allows prices to do exactly the opposite in a small, specialist market, which is what this is at the moment."

One option open to DVD buyers is the internet. A new web site, www.dvdplus.co.uk, is offering DVDs at their suggested retail price with free next-day delivery. "We'll be selling every DVD disc released in the UK from our site at the suggested retail price," said Brian Welsh, chief executive of the site's operators, DVDplus. "Virtually all the major big name software outlets currently selling DVDs are adding mark-ups of between 33 per cent and 35 per cent. They want to see exactly how much they can get away with charging. It's bordering on the criminal, in our view."