Blockbuster has announced it will close86 of its stores in Spain by May 15. Blockbuster Video Espana, which openedits first stores in 1991, reported losses of $6.6m (Euros 5.5m) in 2004, up 65%over 2003, and expects even greater losses for 2005.

The company attributed the closure,which will affect some 688 employees, to a dramatically increasing rate ofpiracy, citing Spanish Video Union (UVE) statistics reflecting anindexrise from 5% to 60% in the last three years.

"Spain is the most pirated country in Europe," said Jose Manuel Tourne, UVEpresident. "The Spanish government has reacted desperately slowly to theproblem."

Tourne cites three key forms of piracyin Spain: copies made for friends andacquaintances, estimated at 37 million in 2004; more than 16 million filmsdownloaded directly from internet each year; and street vendors, the only areawhere Tourne says government intervention has acted as a noticeable deterrent.

The video rental market has also seencompetition from Spain's growing television market, includingcinema-only channels and video-on-demand services. The Blockbuster closure "was a predictable death," Tourne said, citing previous closures of numerous lesser-known videoand music stores in Spain.

Eight Blockbuster franchises willremain open on the Canary Islands.Catalan video chain The Big Orange is reportedly negotiating to buy out some ofBlockbuster's stores in Spain.

Stores will begin selling off stock,including videogames and consoles as well as films, as of March 27.