8 Comments

Summary:

UK media retailer HMV (LSE: HMV) has announced that it will close 60 of its UK stores following very disappointing Christmas period sales (n…

Mark Mulligan, Forrester analyst

UK media retailer HMV (LSE: HMV) has announced that it will close 60 of its UK stores following very disappointing Christmas period sales (normally the most important sales period). Sales were 10 percent down compared to 2009.

The cold snowy weather has been blamed in part, but that is like blaming a common cold for a plague sufferer’s demise. The rot set in long ago and largely (though not entirely) due to factors outside of HMV’s control.

HMV is a victim of the Media Meltdown. Consumers are falling out of love with physical media products and unfortunately are not yet anywhere close to entering into whirlwind romances with premium digital products. The net result is declining sales across massive swathes of HMV’s product portfolio.

Of course consumers still love media. They’re even paying for a lot of it (e.g. Pay TV). But the Media Meltdown loosened the monopoly of control enjoyed by media companies and retailers. We are currently in the midst of a painful transition, and we don’t yet have a set of next generation media products that consumers will pay for on the scale they paid for physical products.

It may be that people will never pay directly for media products in such numbers ever again. It’s certain the media retailers will have a vastly diminished role to play on the high street and in the mall. If they want to be major players digitally they have to reinvent themselves as content destinations rather than just digital retailers. Selling digital downloads of content is a temporary fix. A third way is required.

Take the case of Amazon (NSDQ: AMZN). Amazon’s continued failure to topple Apple (NSDQ: AAPL) as #1 digital music retailer coupled with terminal CD decline means that Amazon’s music business will disappear unless they find a third way. The damp squib that is BluRay means that the writing is on the wall for physical video products too. Amazon’s rumoured bid for complete control of LoveFilm suggests they’re already planning on a third way for video products. And of course with the Kindle Amazon is already well on the path to a third way for books.

Consumers now value access to content rather than paying for units of it, but the contagion of free means that few are willing to pay. Successful digital media products must combine:

  • Access
  • Interactivity
  • Experience

Those three assets imply a synthesis of product and channel. So the role of retailer becomes much more than just selling.

The respective destinies of digital media products and digital media retailing will become increasingly intertwined. HMV’s store closures don’t mean the end of media retailing but they do mean the start of the end for much of the role of the high street.

» Mark Mulligan is an analyst at Forrester Research, where he serves, and contributes to the Forrester blog for Consumer Product Strategy professionals.

This article originally appeared in Music Industry Blog.

  1. I like the expression “contagion of free” – but it goes further than just content.

    There are three Cs to consider in this scenario.

    Connectivity, content and cost.

    I guess there’s a fourth – consumers. In that, consumers don’t like paying for the first of those two Cs.

    But by bundling content and connectivity providers may have found a mechanism for making the cost easier to swallow.

    This is something Amazon has already started doing and it’s a move that has implications for the publishing industry (who will struggle with the unavoidable disintermediation such bundling of their content will bring) and the networks/telcos (for whom the same problem – namely disintermediation – has been their biggest challenge for some time and shows no sign of going away any time soon.

    Share
  2. angry young man Wednesday, January 5, 2011

    good article, although i think price also plays a role in the decline of physical media. hmv, like other big box record stores, died in part because no one wants to pay $14.99 for a CD (and don’t get me started on the pricing at b&n and borders). and from a digital standpoint, amazon has a huge price advantage over itunes, plus they have more specials and they give away much more music. most people go to itunes because they have ipods, but they will become more discriminating over time, i think.

    Share
  3. Unfortunately, I don’t see that there is ANY future for a bricks and mortar retail store whose sole existence is based on media sales. Please see my comment regarding Mark’s excellent piece:
    http://www.sideways.com/archives/723

    Share
  4. Its not the store that is irrelevant, its the container. Vinyl, CDs and now MP3/AAC files are containers for the media. Containers for media are obsolete. The only model going forward that will make sense is subscription and all you can eat like Rhapsody/Spotify for music and Netflix/Hulu for film. More media will be consumed with more revenue spread to the content owners.

    Share
  5. poor article, no context.

    60 store out of HMV’s 6 million stores are closing or out of their 600?

    Share
  6. The main problem is that music has been downgraded as a product. as soon as C.Ds were offered as give aways in magazines, and in the case of Prince in newspapers, who now wants to pay when you can also possibly illegally download.
    Could it be that is the reason that vinyl sales are increasing. its a tangible value carrier

    Share
  7. Is HMV a victim of the media meltdown, or were they just another sheep following in the footsteps of inaction in the midst of a technology leap? I’m over hearing how music and other traditional media are victims of meltdowns or technology – my view is that they were/are victims of ego, pride, greed, inaction, and victims of the lack of strategic thinking in their own organisation as well as their industry.

    Share
  8. – ‘ego, pride, greed, inaction’ are all part of the media meltdown. They are in fact all part of the broader concept of disruption. Traditional products and channels get disrupted by new entrants and they fail when they prove themselves incapable of reacting in a quick enough and comprehensive enough manner. Instead of recognizing a disruption needs harnessing they continue to think ‘we’re too good to fail’.
    – music has certainly been downgraded as a product. There’s so much of it available for free now, whether that be from multiple music TV channels, music synched to console games and ads, magazine cover mounts, on demand streaming, youtube, soft drinks promos etc etc. And that’s without even considering the illegal side of free. Scarcity of music has gone. In turn perceptions of value have eroded. That can’t be changed…at least not any time soon.
    – it may only be 60 stores, but it is one not-insignificant step on a longer journey. HMV and other retailers have been watching their music business contract for years. In the UK we’ve recently seen two major retailers (Zaavi and Woolworths) disappear entirely from the music retailing map. The context here is continued decline across most of the entire traditional music retailing marketplace. (BTW I’m sure HMV would love to have ‘6 million’ stores!)
    – I love the three C’s. They map neatly with the 4 C’s I posited in 2009: Content, Convenience, Cost and Community. http://blogs.forrester.com/mark_mulligan/09-09-08-music_release_windows_product_innovation_music_business_can%E2%80%99t_do_without
    Connectivity was missing from that list but will be included in a new list of digital music success imperatives I’ll be presenting next weekend at Midem

    Share

Comments have been disabled for this post