Lax regulation by authorities in Ontario is indirectly causing a glut of adult DVDs to flood the market in Canada and come back to the U.S., according to Richard Arnold, CEO of Pure Play Media.
Arnold, who is Canadian, has owned distribution companies in Ontario, Quebec and British Columbia since 1992. He told AVN.com that he wants to call attention to the difficulty of being an adult distributor in Canada.
“Everybody thinks, oh boy, there’s Canada,” he said. “But if you look at how we have to do business up there, it’s very difficult: all the approvals, all the areas. We have three regulatory boards plus other little areas, and we have 30 million people. It’s not fun.”
In Ontario, the most populous province, the law stipulates that adult video imports must be edited and licensed before they can be sold.
The distributor has to make required changes and wait for the approval of the Ontario Film Review Board. Then they get a sticker to affix to the product and are allowed to distribute it.
Arnold said that the editing, usually minor, has to be done “three out of four times.” The upside of the process is that “if it’s an approved title, we don’t have any legal liability.”
But unregulated product started to be imported a few years ago and to flood the video stores. These are not bootlegs but legitimate product sold in a gray market without proper certification.
“By the time I’ve gone through all my process, six to eight weeks, it’s already been on the street for a good portion of that time.
“I then go to release a product and I can’t sell it. The customer says, ‘Hey, I’ve already got it.’ Or Store A has it, and Store B says, well, Store A has it, I don’t want it, or I’ll take less quantity.”
The crux of the problem, Arnold said, is that enforcement of the rules in Ontario is practically nonexistent—in stark contrast to Quebec, where regulations are strictly enforced and no unlicensed product can be sold.
The advent of the DVD, Arnold said, only made things worse. “In order for us to get approved in all the territories, we actually have to manufacture our own DVDs. The laws of economics say that you really can’t manufacture less than a thousand DVDs. We produce 1000 DVDs and by the time we get them on the street we’ve lost 400-500 sales in Ontario.
“The net result is now there’s a glut of DVDs on the market. What happens is people start lowering their price, and the price gets so low that people start shipping it into the U.S. A lot of Canadian product is ending up back in the U.S., because of the whole collapse of the pricing structure.
“I’m one of the owners of Pure Play Media. We have great lines, and I’m finding my own product back in the U.S. And I don’t have the ability to prevent it from happening.”
The deteriorating situation, he said, led him to shut down his main operation in Ontario, laying off 18 people. He continues to distribute in Quebec—“a very secure territory” —and in British Columbia, a smaller but also secure market.
“My salesmen at Pure Play,” he said, “are ecstatic that I’m closing my office in Ontario. They’re sick of hearing, when they go to sell an area, ‘I already bought it in Canada cheaper.’”
Arnold places the blame squarely on the Ontario government which, he says, should either get out of the business of regulating, or follow through with it.
“Our argument has been, either do it or don’t do it,” he said. “It doesn’t work in between. We have been fighting them for years to do this, and we always get the same response: ‘Well, we’re trying,’ or ‘We don’t want to seem too heavy-handed to the retailer.’
“In the meantime the guys who try to operate within the rules in Canada are driven out of business. The guys that are comfortable importing product—which I don’t necessarily think is a bad thing—are operating with impunity.”
Arnold says he hopes that his going public about the problem will help drive home to the Ontario government that what they’re doing is causing problems at home and abroad.
“The other thing,” he said, “is that I know a lot of American producers are very frustrated with Canadians and with the fact that they are seeing their product coming back down here. Hopefully, this explains to them at least why it’s happening.
“More and more companies are getting resistant to selling rights because they’re finding their stuff is ending up all over the place. Now that I’m a producer of product, it hits home even more.
Pure Play Media can be reached at (818) 717-5355.
