But DVDs are also becoming major factors in the profitability of movie releases. If the DVD of a movie reaches a country before the movie has been released in the theaters, it is going to seriously affect its profitability for Hollywood studios, who release the same movie in different countries at different times. To prevent a DVD making it before the movie hits the theater in a particular country, the studios have devised a coding technique; there is a digital flag on the DVD that conveys to the hard-coded DVD player about where the DVD originates from.
When the disc is loaded, the software in the player compares the codes on the disc with the one set in the player’s register. If the codes do not match, the disc won’t play. For instance, a Code 4 DVD cannot be played in a Code 1 DVD player. In this way the DVD of a movie from a country where the movie is released cannot be played in a country where it is yet to be released. This not only enables studios to release the same movie in different countries at different times, but also enables them to practice price differentiation between countries for movie tickets as well as DVDs, thus adding potential revenue to the studio coffers.