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Ben Kwok

Australia-based Village Roadshow has sold its 50 per cent stake in cinema operator Golden Village (GV) to joint-venture partner Golden Harvest Entertainment (Holdings) for A$13 million (about HK$59 million) because of rampant copyright piracy in Hong Kong.

Managing director Graham Burke, in a statement to the Australian Stock Exchange yesterday, said Village Roadshow pulled out of Hong Kong because piracy made doing business unviable in the SAR.

Australia's largest cinema chain said the selling price of its holding in GV was above book value.

GV has six cinema complexes in Hong Kong with a total 26 screens.

Despite a government clampdown, analysts said pirated movies made mostly in the mainland were readily available throughout the SAR.

'People can still buy pirated copies on the street,' said Tessa Lau Siu-man, corporate development general manager at Broadway Circuits. 'That is definitely hurting our industry.'

Industry executives said it took only five days after a first showing of a popular movie in the United States for pirated copies to be sold in the mainland and Hong Kong.

Despite Village Roadshow's concerns about piracy, the company's exit is coming at a time when Hong Kong's cinema industry is strengthening.

Box-office sales last year rose slightly to HK$876 million, bolstered by an improving economy and better-quality movies, according to the Motion Picture Industry Association.

In the first half of this year, box-office sales continued to improve for most cinema operators. Broadway Circuits' box-office sales in the half jumped 21 per cent from a year earlier, while those of United Artists rose 13.8 per cent.

But GV's box-office sales dropped 4.5 per cent to HK$66 million in the period.

Village Roadshow, which had abandoned attempts to take over Golden Harvest, in May sold its controlling 35 per cent stake in the company, mostly to Taiwan computer-maker Acer for HK$423.17 million.

Analysts said Village Roadshow at best broke even on its five-year investment in Golden Harvest.

Village Roadshow first bought into Golden Harvest in 1996, as part of a plan to build an international empire. It paid HK$158 million, or HK$2.86 a share, for a 10 per cent stake.

Village Roadshow became Golden Harvest's largest shareholder two years later after fighting against a private placement by Golden Harvest.

In June 1998, Golden Harvest increased its capital base by 20 per cent through the issue of new shares to Australia-based News Corp, Malaysia-based Kerry Group and Hong Kong tycoon Li Ka-shing at 50 HK cents each.

Not being informed about the placement, Village Roadshow unsuccessfully took the case to court in an attempt to block it. Nonetheless, the company bought out the new investors two months later to increase its stake to 35 per cent.

In December, Village Roadshow bought Golden Harvest's stake in South Korean and Thailand cinema operations owned by GV for HK$125 million. But the company retains its partnerships with Golden Harvest in Singapore and Malaysia. The companies own a 50-50 joint venture in Singapore operating the GV cinema chain with 64 screens.



Harvest partner quits over piracy