Friday, 18 January 2013

Late last year, I made two predictions for 2013

Late last year, I made two predictions for 2013;

Night would continue to follow day
HMV would go bust.

Surprisingly, both have come true (but please don’t ask me for next week’s lottery numbers).
HMV have been appallingly managed for at least a decade. What sums this up as much as anything was that when grossly overpaid fat cat CEO Simon Fox waddled off to run Trinity Mirror, the national comic publishers, his successor was headhunted at great cost from that other titan of the High Street, Jessops Photographers. Trevor Moore, the new head honcho, introduced the same cutting-edge strategy that he implemented at the camera –shop chain with similar results…a collapse in sales followed by bankruptcy.

While the national press drone on sympathetically about HMV being a victim of technological change, unable to compete with digital downloads and on-line sales from Amazon, the truth is altogether more prosaic – those running HMV had not the first idea of the needs, mindset or culture of music lovers. As with so many (now defunct) major record labels, the money men believed that a pot of gold lay at the end of the musical rainbow, and this could be excavated by endless growth, acquisition and marketing strategies based upon monopolistic practices and the throttling of ‘competition’. In HMVs case, this meant buying up competing chains, such as FOPP, expanding into every vacant High Street slot that came available and using their increasingly dominant position in the market to demand ever better deals from their suppliers (record and film companies) as a means to bludgeon the independent sector to death. The strategy was successful. Small, local shops could not compete on price, particularly on new releases and best sellers – bread and butter sales which pay the rent and effectively subsidise the eclectic back catalogue that is the lifeblood of true music lovers everywhere.

The major labels and distributors colluded in this savage assault on independent record stores. Whereas it might be logical to assist the small shops by offering them lower prices and extended terms, the suppliers did the opposite by putting all their eggs in the supermarket and chain-store baskets. Sure, a few enlightened independent labels did their best to support small shops by offering exclusive, usually vinyl, releases but to nothing like the extent that they should. And the upshot?
HMV decimated their competition. And now that HMV have gone, we have…we have nothing left.

Of course, Simon Fox’s great salvation strategy for HMV was to rebuild the company fortunes by selling…what? Cut price CD’s? HMV branded downloads? Special edition DVDs and CDs? No. His lightbulb moment was the belief that his 239 High Street Mega Stores could be reborn on the back of Dr. Dre headphone sales, Chinese memory sticks and high-tech-tut. In other words, this grossly overpaid buffoon sought to reinvent HMV as a latterday Woolworths, and I guess he was successful in at least one respect – HMV have followed their illustrious forebears into Carey Street. Both are now history.

So much for the past. What of the future?
Well, here’s another prediction. Half of HMVs defunct stores will be purchased by a venture-capital group for peanuts, within the context of a deal with major suppliers offering reduced prices, extended credit terms and possibly even an equity interest. Because the major labels simply cannot afford to lose the monopoly sales opportunities that they themselves allowed HMV to create. But choice will become even more limited as the ‘new’ HMV abandons any stores that are even marginally loss making and increasingly becomes an outlet for major labels rather than offering any cross-section of choice for customers. So once again market forces will be distorted by the monopoly that HMV became. Like Clinton’s cards or Thornton’s chocolates, HMV will, to all intents and purposes, be ‘Universal/Sony/Warners Records’, promoting a narrow choice of ‘in house’ brands to the exclusion of consumer choice or demand. Because with birthday cards or chocolates, if you don’t like the Clinton or Thornton’s offerings, there is plenty of alternative choice down the road. But with records and CDs, if HMV don’t have what you want, it’s our tax-dodging chums at Amazon or nothing.

Gone will be the days of in-store promotion, knowledgeable staff, extensive back-catalogue, varied in-store and window displays or the opportunity to check out minority releases. HMV will cater for any colour or shade of taste you want, as long as it’s black, black, black.

In the short term, our industry will suffer. Most small labels will lose money from the store collapse and some may well go bust. The larger labels will lick their self-inflicted wounds and carry on, demanding a stake of future action along the lines suggested above. Yes, they’ll lose dosh from the liquidation and no doubt try to grab this back from unwitting artists who weren’t consulted and didn’t agree to the debt-for-equity swaps and extended credit the majors gave the retailer. Universal will take a long term hit, I gather, because EMI (now owned by Universal) hold forty of the most expensive high street leases on larger branches. Indeed, having grossly overpaid for EMI last year, I bet Universal are regretting ever having got involved with such a basket case – all the news is negative. But it was that old ‘bigger is better’, ‘economies of scale’ and ‘screw the competition and customers alike by becoming a monopoly’ school and vampire business philosophy at work again.
So, what can a small label do to combat the megaliths? How about this…?

High Streets up and down the country are overflowing with charity shops, something that will increase as more and more chain stores feel the pinch and fold (and of course, if an owner leaves a shop empty, he’s liable for rates and taxes, whereas of he allows a charity shop to take the space, he avoids these). Is it beyond reason for a union or cooperative of independent labels to join together to form a distribution network and offer to stock Oxfam, say, with racks of new releases and prime back catalogue at a reasonable selling price (£3.50 - £5.00) and a decent 25/30% margin? The distributor could supply CDs on sale or return (or consignment – paid as sold), management software and listening booths.

Overnight, hundreds of new outlets would offer music lovers around the country an alternative to the chain-gang…er chain stores and what’s more, instead of the retail margin fattening shareholders, venture capitalists of multinational tax avoiders, worthwhile causes would benefit. And it might just put the reason and soul back into modern music.

It’s a thought…

1 comment:

  1. Liking your blogs .Do they only go back to January of this year?