(February 24, 2005 - Beijing and Burbank, CA) – Warner Home Video today announced the historic formation of CAV Warner Home Entertainment Co., a joint venture with China Audio Video, making Warner Bros. the first U.S. studio to establish an in-country DVD/VCD distribution and marketing operation in China. Based in Shanghai, CAV Warner Home Entertainment will officially launch operations today. The announcement follows extensive analysis by Warner Home Video of the dynamic Chinese home video market and its potential for continued growth. As a result of this research, Warner Home Video chose to partner with China Audio Video to capitalize on China’s enormous consumer demand, which is projected to exceed one billion units this year and includes a growing appetite for legitimate alternatives to poor quality pirated goods. “Warner Home Video operates the largest global video distribution system in the world,” said Jim Cardwell, President, Warner Home Video. “China has been an important market for years, but too often Chinese consumers have had to choose inferior products on the illegitimate market that were available sooner but with poor quality. CAV Warner Home Video is committed to creating a better consumer experience and increased demand for legitimate products via world-class quality, reduced pricing, Mandarin dubbing and sub-titles, enhanced content and shortened release windows.” As a precursor to the full-scale nationwide rollout for CAV Warner Home Entertainment, China’s foremost retail and video outlets including Wal-Mart, Sam’s Club, Xinhua Book Store, Carrefour, R.T. Mart and Maya began carrying select new releases in November, including “Troy,” “The Last Samurai” and three NBA titles. These titles debuted in key cities such as Shanghai, Beijing, Guangzhou, Shenzhen and Nanjing. CAV Warner Home Entertainment’s ramp-up continued and expanded throughout December to include additional cities and titles. More than 125 titles will be available at launch, including “Harry Potter and the Prisoner of Azkaban.” By the end of third quarter 2005, CAV Warner Home Entertainment’s nationwide market introduction will be completed and its products will be available throughout China. "The potential for legitimate sales in China is extraordinary,” said Mr. Wang Xiaoran, President of China Audio and Video Publishing House (CAV), who also will be the President of the JV. "Under the leadership of the Ministry of Culture, we hope to solidify the legitimate home video market in China and while we have made great progress to date we have much work to do in the future. However, the combination of Warner Home Video’s expertise and our relationships and infrastructure will make CAV Warner Home Entertainment an unparalleled force in China’s home entertainment market.” CAV Warner Home Entertainment will issue new releases on DVD in a two-tier product release and pricing program. “Silver Releases,” available shortly after a film’s U.S. theatrical release, will feature English and Mandarin dialogue tracks and Mandarin subtitles. “Gold Releases,” will be available in China later than “Silver Releases” and will roughly correspond with their U.S. market DVD release dates. These releases will have all the features of a Silver Release, as well as enhanced DVD extras such as additional language selections, behind-the-scenes footage, talent interviews and director’s commentary. All product will be replicated locally in China. Silver Releases and catalogue titles will have a suggested retail price of RMB 22 ($2.65 USD) and Gold Releases will be priced at RMB 28 ($3.38 USD). All 2 disk VCD titles, which will have the same features as Silver Releases, will be priced at RMB 16 ($1.93 USD). “CAV Warner Home Entertainment will offer consumers a better alternative to pirated discs because our products will feature content not yet available from the pirate market and the assurance of receiving the highest quality product at an affordable, competitive price,” said Cardwell. “This is truly a precedent-setting event for our industry,” said John Quinn, Executive Vice President, Worldwide Supply Chain Management, Warner Home Video. “Our strategy is to not only create tremendous consumer demand by offering a superior product at a competitive price, but also to create job opportunities, new tax revenues and increase consumer satisfaction. And, we could not have a better partner than China Audio Video to help us make this historic move into the robust Chinese home video market.” Warner Home Video, a Warner Bros. Entertainment company, has operations in 90 international territories and commands the largest distribution infrastructure in the global video marketplace. Warner Home Video’s film library is the largest of any studio offering top quality new and vintage titles from Warner Bros, Pictures, Turner Entertainment library (including the classic MGM library), Castle Rock, HBO and New Line Cinema.
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