Facing the music
29.01.13 | Neill Denny
The moment when HMV called in the administrators, although it had been predicted for a long time, was no less shocking for that. There was a genuine, collective wail of anguish from music fans for whom HMV was a core part of their mental landscape. Even if they went there less and less as they switched from CDs to iPods and downloads, it was still a shop they felt an instinctive affinity for.
HMV’s core problems were threefold: a failure to develop an effective online offering; supermarkets discounting the hell out of their core products, and a declining market which has seen the value of the music business halve in the last 15 years. Add in the wider economy’s “lost half decade” since 2007 and you have a recipe for serious trouble.
A succession of managements were unable to square the various circles. A failed venture into CD catalogue selling in the early 1990s (HMV Direct) had prejudiced the senior management against distance selling, including the internet, and for a long time the business was so profitable there seemed no need to bother. The successful float in 2002, at a share price of 192p, perhaps lent the business a false sense of security; the shares peaked in 2005 at 272p and as recently as 2009 were still at 150p. But all the while, one by one, customers were quietly migrating to the web.
The management were not unaware what was going on. Initially the DVD boom provided insulation from the harsh realities of the core music business, and then efforts were made to diversify into hardware (especially headphones) and computer games. Ironically, this diversification gradually weakened the core music offer, while the new categories themselves fell victim to cheaper internet retailers. My local store (Sutton) now has less than half its floorspace devoted to music.
Although the specifics of Blockbuster’s collapse were different, many of the underlying causes were the same, principally the effects of the internet. Why schlep off to a video rental store when you can download the film you want without leaving home, and often for free? Piracy has meant that a significant number of customers, particularly heavy users, have gradually fallen out of the habit of paying for either music or film.
For high streets in general the loss of these two retailers is a serious blow. A whole category, entertainment (i.e. music and video content) has effectively now gone from town centres, itself just one more reason not to make that trip. In fact, the whole notion of “a trip to the high street” is looking increasingly archaic.
The key mistake of the ’80s and ’90s was to limit town centre redevelopments and car parking while allowing new out-of-town developments with free car parking. The investment and the new stores went out of town, which became the destination of choice for big shopping trips. The town centre gradually hollowed out; fewer destination stores, more coffee shops, charity shops, discounters and just plain voids—one store in nine is now empty. A vicious spiral has now set in: fewer shops, fewer visitors, less business, fewer shops. And at a more subtle level, better-off people are congregating in the malls, leaving high streets the preserve of the old, the poor and the carless.
But the loss of Blockbuster and particularly HMV has an added twist: entertainment stores were places men retreated to during family shopping trips. Not necessarily to buy, but to kill some time with some serious browsing, a role of course also filled by a good book shop. W H Smith, and indies, may here see a strong upside. Meanwhile, Amazon may feel a surprising sting from HMV’s demise, for internet retailers have benefited enormously from shops acting as free showrooms for products they are selling more cheaply online. Now they may have to start paying for their own marketing.
Neill Denny is former editor of Retail Week and The Bookseller and can be reached at email@example.com