The Fate Of Music Retail & The Silencing of His Master’s Voice

FALL IN SALES
It depends who you listen to, but it seems the future looks bleak for high street giants HMV. Sales have fallen 13% and 40 of their 280 UK stores are set to close. It has also emerged that companies supplying HMV have had insurance policies stopped, ultimately meaning that they are trading at their own risk. Robert Peston, BBC's Business Editor, says that “suppliers really rate HMV, and they're desperate for it to survive... most of the ones I have spoken to say they are continuing to supply HMV and take the risk." The reality is that a similar thing happened shortly before Woolworths and Zavvi closed down. Share prices have fallen and retail analysts have commented that it could signal the beginning of the end.

DEMISE OF THE MARKET
But is this really surprising? Even before the economic downturn, music retail had been hit hard - firstly by the fact that illegal downloading is practically socially acceptable and therefore rife - secondly because legitimate consumers have the option to buy products legally for cheaper, online - and thirdly because most supermarkets now stock chart music, convenience is king these days, after all. Showing his usual good foresight, after monitoring the beginnings of the downturn in the market, Richard Branson sold Virgin Megastores to Zavvi in 2007 – a shrewd move, as Zavvi went into administration in December 2008. HMV, not seeing what was around the corner, bought 19 Zavvi stores which they merged into the HMV chain. Acquiring more property at a time when sales were falling, not long after your main competitor got out, seems unwise to me. For a while, they would have benefitted from being the main music retailer on the high street and this could have masked the reality of the matter.

FALSE ASSUMPTIONS?
Or… they might not be in trouble. The analysts could be wrong and this may just be the result of a company adapting to the market, streamlining in order to ensure stability in difficult economic times. HMV Group announced they are simply selling the stores in order to save £10 million over the next 12 months. They are also a fairly diverse organisation which could hold them in good stead if the music side of the business is in trouble. They have strong international presence with 132 HMV stores outside of the UK. They also own Waterstones, (20 of the 312 Waterstones stores are also set to close) which over the years has acquired Dillons and Ottaker’s, dominating book sales on the high street. They’ve also diversified into owning large stakes in music venues and are really pushing the online sales side of the business. But of course, sound business practice often demands you act as though everything’s under control, even if you’re in fact treading water. HMV boss Simon Fox will be desperate to implement damage limitation: By selling off the stores now, he knows he’ll get a much better price than if he waited for the administrators to get involved.

DAMAGE & DEVOLUTION
Seeing HMV disappear from the high street would also have negative knock on effects that would damage the retail industry as a whole. For example, HMV stores act as a pull factor in shopping arcades, with smaller retail brands capitalising on the passing traffic by enticing customers through their doors. Despite a fall in sales, I wouldn’t be surprised if numbers passing through HMV’s doors have remained fairly constant. 'Customers' have simply turned into 'browsers,' and HMV Group have suffered a predictable devolution from a successful retail icon, into a kind of tangible audio search engine. Come to think of it, even though I love the brand and I’m often in HMV, I can’t actually remember the last time I bought anything there…