The Journal writes about Hollywood's strategy to (finally) begin discounting DVDs in China in an effort to be more competitive with the pirated DVDs.

The discounted DVDs will still cost roughly three times what the pirated versions cost, but at least we're in the same general ballpark. I suspect a growing number of newly affluent Chinese will pay a premium for a higher-quality movie, not to mention all those DVD "extras."

But what is particularly interesting is Warners' plan to coordinate DVD releases in China with theatrical releases in the US. According to the article...

Warner Bros. plans to release more than 125 movies this year in China, including hoped-for blockbusters like "Batman Begins," around the time of its U.S. theatrical release. They will sell at two price points: $2.65 for relatively basic discs, with English and Mandarin dialogue tracks, and $3.38 for fancier versions with extra footage and language enhancements.

So this means that Chinese consumers will have a head start on Americans in getting the newest DVDs. I wonder if we'll see an underground market develop as Chinese begin selling these DVDs back to Americans.

Despite the inherent risks though, the studios have little choice but begin testing lower prices. Even at these cut-rate prices, there is a good potential for profits should enough Chinese begin bypassing pirates for Hollywood.

Hollywood is not alone in its struggles with emerging markets. Microsoft is working on a lower-priced operating system for countries such as Thailand, India and Indonesia, referred to as Windows Lite. I'm less optimistic with Microsoft's approach because instead of just cutting prices (which is what Hollywood is doing), Microsoft is cutting features.