Major retailers of VCDs and DVDs, who have been severely hurt by unabated piracy, have begun shutting down branches that fail to make profits so that they can improve their bottom lines and maintain their fight against the illegal industry.

Their moves coincide with Thailand's recent relegation to the Priority Watch List by the US administration as a country among the world's worst offenders against international copyright rules. Thailand's lack of control over optical-disc media (VCDs and DVDs) was singled out.

The closure of local VCD and DVD stores is a measure of how much damage is being inflicted by the piracy problem.

Kitti Kerati-thamkul, senior investor relations officer for Pongsaap, which operates the Mangpong retail chain, said his company's new strategy of closing unprofitable outlets began in the final quarter of last year.

"We've reduced the number of Mangpong outlets sharply, from the peak of 370 outlets last year to about 200 outlets today," he said, adding that the reduction was based on a review of store performance. Those failing to generate a good profit have been shut down.

"The move will help reduce the company's cost burden," Kitti said. Twenty of Mangpong's outlets have been converted into "Grande" outlets, selling VCDs for between Bt19 and Bt49, in direct competition with pirates.

Kitti said consumers' lower spending power in the present economic situation had driven them to buy pirated VCD and DVD movies, which cost them less than licensed copyright products. The pirated products do not pay any tax, so the country gets no benefit, he added.

Tsutaya chief executive Wanchai Phlaphongphanich said the market for VCD and DVD sales and rentals in Thailand was worth more than Bt50 billion last year.

Almost 80 per cent of that, or Bt40 billion in sales, went to pirated goods, meaning the government lost about Bt5 billion in tax revenue.

"I don't understand why the government hasn't introduced stronger measures to stamp out piracy," Wanchai said, adding that if the law was more strongly enforced, the government would have more money to spend on improving its services, such as building better schools.

He said piracy was one of many problems in Thailand dampening inspiration and creativity.

"From my point of view, the current government is full of idealists. They have good heart but suffer from a lack of direction," Wanchai said.

Last year, Tsutaya recorded a 12-per-cent fall in gross sales.

"It was supposed to be a good year for VCD and DVD sales due to the weak economic situation, in which people choose not to visit expensive entertainment venues," he said.

Tsutaya senior vice president Sarawut Sawatdivorn said the impact of worsening piracy had driven the company's sales down by almost 28 per cent in the first quarter of this year. It has shut down about 10 outlets over recent months.

The company currently operates 250 Tsutaya stores locally, including outlets owned by franchisees.

Sarawut said licensed copyright products appeared on the market 45-60 days after the end of theatre screening but that pirated products could hit the retail shelves at the same time as movies open in theatres. Between 85 per cent and 90 per cent of local rental stores have pirated products, he said.

Rose Video vice president Jirath Pavaravadhana said the piracy problem was becoming more intense and causing a decline of at least 20 per cent in sales of copyrighted products from VCD and DVD vendors.

"In some provinces, we've found outlets selling pirated products in front of police stations and even schools," he said.

Jirath said the worsening piracy problem was seen both in sales of copied VCDs and DVDs and in downloading illegal contents from the Internet. He added that the authorities' strict censorship of legal copyright programmes was also turning consumers to pirated products, which escape the censors' cuts.

"We have a strategy of opening retail stores in strategic locations specifically to deny these locations to pirate operators," Jirath said, adding that Rose Video has opened outlets in many shopping complexes and local upcountry malls. The company currently has about 120 retail outlets around the country.

Jirath said Rose Video's full range of family entertainment, including cartoons, karaoke and stage comedy, helped it to balance the impact from pirated products.