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Doug Nairne

Microsoft's revolutionary Xbox games console will not be sold in Hong Kong or on the mainland because of fears over software piracy.

The US software giant is launching a US$500 million (HK$3.9 billion) marketing campaign to promote the new system, but company sources said it had no plans to sell the consoles in the SAR or China due to the ease with which consumers could obtain cheap, illegal copies of software.

The decision will be seen as a blow to the SAR Government's claims that it is winning the war against software piracy.

'We sell the consoles at a loss and make money on the games. If pirated games are available, we can't make money here,' a Microsoft source said.

Merrill Lynch analysts estimate Microsoft will lose US$125 on each of the US$299 Xboxes it sells.

Microsoft spokesman Olivier Richard said the Xbox would be launched today in the US, followed by Japan in February and Europe in March. He said no date had been set for the mainland or Hong Kong.

'In a country like the People's Republic of China, consumer demand for PCs and other hardware products is still quite small, compared with the professional market,' he said.

Microsoft has been hit repeatedly by software pirates in Hong Kong this year. Illegally copied versions of the company's new Office XP and Windows XP products were being sold for a fraction of the usual cost weeks or sometimes months before the official launch dates.

The chief rival of Microsoft's Xbox, the Sony PlayStation2, has also suffered at the hands of pirates. The Sony console is not officially available in the SAR yet, but parallel import versions can be found in local computer malls. One store yesterday was selling PlayStation2s that had been modified to play pirated game discs. The unit sold for $3,980, significantly more than the official price in Japan of US$299 (HK$2,329).

Pirated copies of games, which cost up to $1,000 to buy legitimately, are on sale for as low as $10.

A Sony spokeswoman said the company had no plans to officially sell the PlayStation2 in Hong Kong.

The easy availability of pirated games conflicts with claims by Customs officials earlier this year that the war against illegal software had been won.

Commissioner of Customs and Excise John Tsang Chun-wah said last October that piracy had been virtually eradicated and that there were less than 100 stores selling pirated software - down from a high of 1,000. Most opened for only a few hours a day, he said.

However, some industry observers have since suggested that enforcement efforts had dropped off, allowing piracy to flourish again.

Although Microsoft has decided not to sell the Xbox in Hong Kong, the system will almost certainly be available on the grey market, as exports bound for another country can be shipped by a middleman onwards to the territory.



Piracy forces Microsoft to can Xbox sales in HK