Sat, Feb 14, 2004 page11

• Piracy driving down video rentals

  MALAISE As bootlegs proliferate on the Internet and the economy causes people to scrimp on entertainment, video retailers are finding it difficult to post good results

  • By Amber Chung / STAFF REPORTER
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  While the video-rental market in the US is being threatened by low-priced DVDs sold by discount retailers like Wal-Mart, the industry here is suffering from a slow economy and rampant piracy, an executive at Blockbuster Taiwan said yesterday.

  "The nation's video-rental industry has suffered a continuous decline for the past two or three years as economic sluggishness has caused people to spend less on entertainment," said Darrel Lee (李建學), marketing director at Blockbuster Taiwan.

  Blockbuster Inc, the world's biggest video-store chain, with over 8,500 outlets, announced late last month that it is exiting the Hong Kong market and will drop plans to enter the Chinese market.

  "We saw no growth in our sales last year in Taiwan," Lee said.

  "The situation is not getting better this year, as the estimated value of Taiwan's video-rental market may drop 10 percent to around NT$3 billion this year" he said.

  Blockbuster entered the Taiwan market in 1997. It has become the nation's largest video-rental chain, with 126 outlets and a 40 percent market share.

  While Blockbuster's local business is stagnant, the US operation is facing declining revenues on account of competition from low-priced videos.

  Blockbuster's major shareholder, Viacom Inc, the media conglomerate that owns MTV and CBS, announced earlier this week that it is planning to sell its 81-percent stake in the company and is taking a US$1.3 billion charge to reflect the declining value of its video-rental business.

  The problems ailing Blockbuster in the US are different from the ones experienced by local video-rental operators because shopping habits and population density in Taiwan and the US are different, a local video-rental chain official said.

  "People in the US may prefer to buy videos instead of renting them because returning videos can be a troublesome thing for those living in areas with sparse population and few shops," said an official at Asia 1 (亞藝影音), Taiwan's second-largest rental chain, with 112 outlets. The official asked not to be named.

  "The price of buying a DVD can run as high as NT$900 here," the official said.

  Renting costs only NT$100 at the most and is comparatively beneficial for consumers in densely-populated Taiwan," the official said.

  What is really damaging the industry here is the rampant piracy problem, Lee said.

  "In addition to the slow economy, pirated videos that used to be sold in night markets can now be downloaded from the Internet for free, further worsening the situation," he said.

  It has been reported that the piracy problem is what forced Blockbuster to withdraw from Hong Kong, but Lee dismissed that claim. Instead, he attributed the closing of Blockbuster's Hong Kong operation to high operation costs, including rents.

  But piracy remains the biggest concern for the industry, another industry veteran said.

  "Pirated videos may account for over 50 percent of all digital video discs and compact discs that you can find in Taiwan, which greatly threatens the industry," said Joseph Yuen (阮志成), chief operating officer at Deltamac Taiwan (得利影視).

  Deltamac imports videos from many of the world's largest movie producers and distributors, including 20 Century Fox and New Line Production, Inc.

  "We do hope the government can put more effort into combating piracy and protecting the industry from sales losses caused by this crime," the official at Asia 1 said.
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