Blockbuster Inc, the world's biggest video-store chain, is exiting Hong Kong after four years because of high rents and will drop plans to enter China.
"The operating costs, mainly shop rents, is very high," said Michael Wong, director of marketing for Dallas-based Blockbuster's Hong Kong operations. "It's not an easy place to do business."
He declined to say whether the company has been profitable in Hong Kong.
PHOTO: AFP
Blockbuster, which has about 200,000 Hong Kong customers, has 17 shops in the city after closing seven and plans to shut another seven by March. The company, which will fire 200 workers, let a fifth go yesterday, Wong said.
The company has a store in the Prince's Building, located in a prime shopping area where landlord Hongkong Land Holdings Ltd charges US$32 per square foot. This compares with an average US$21 for retail space in Singapore. Retail rents are reviving as tourism rebounds, fueling spending at shops.
Blockbuster talked to potential buyers before deciding on the closure, but "the new buyer would face the same problem and may not succeed," Wong said.
Blockbuster had intended to use Hong Kong as an entry point to China, where pirated digital video discs and compact discs can be found almost on the same day as a movie's premier. The pirated goods sell on sidewalks in China for as little as 8 yuan (US$1), less than half of what Blockbuster charges for new rentals.
Blockbuster ended plans to enter China after concluding the market won't be able to meet its expected return, Wong said, without elaborating. Piracy wasn't the biggest reason for the company's decision to shun China, he said.
In China, more than 90 percent of software, music, movies and computer games sold were pirated, causing about US$1.9 billion in losses in 2002, the South China Morning Post reported. In 2001, China sold US$160 million in pirated DVDs and VCDs and US$47.3 million in pirated CDs and cassettes, it said.
Blockbuster will keep its operations in Thailand, Taiwan, Australia and New Zealand in Asia, Wong said.
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