Can You Teach An Old Dog New Tricks?

HMV is selling off its accumulated assets in order to survive, but is it too late?

Established in 1921 through its landmark store in Oxford Street, and famous for its iconic ‘dog-and-gramophone’ trademark, it is now a troubled business whose share price has declined by 90% in the past 12 months.

It has travelled a long and winding road in the last 90 years.   The growth of retail “clicks” saw it set up HMV.com in Guernsey in 2008, undercutting its own high street stores as sales were VAT free.  The company website says it is unique in its “360-style” offer, which I can only assume means that they are trying to do everything, to surround the customer so that they can’t escape. Perhaps that might have worked, if they had a compelling proposition in each area and genuine benefits of scope and scale.

They go onto say:

”HMV is the UK and Ireland’s leading entertainment brand, enabling comprehensive access to much of today’s popular culture through its chain of stores and online and digital sites as well as through its growing live venue, festivals, ticketing & promoting and artist management operations.”

Wow, that is some scope and they owned Waterstones too, until it was bought by one of HMV’s rich Russian shareholders in May this year.  They are currently involved in:  retail, bricks plus clicks, of music and other popular “content” and now technology products; they are also the country’s second-largest live music and ticketing operator, through their ownership of MAMA Group; they offer a download service at hmvdigital.com powered by 7digital (50% HMV owned); and artist management too.

Should they have seen the writing on the wall with the MBO of Virgin Megastores in the UK in 2007 and the failure of the rebranded business Zavvi?  When Zavvi entered administration it sold some stores to HMV and others to Head Entertainment that then announced their closure in 2009. Instead, HMV saw it as an opportunity to consolidate their position on the high street, in spite of the steady decline of high street sales and the growing retail power of both supermarkets and the internet.  Even EMI’s troubles didn’t put them off.

Doing more and more obviously hasn’t worked for them and why would it?  It isn’t clear to me what the brand, or the group structure for that matter brings to their various activities.  So, perhaps they should try a new approach and pick one of the things they are best at to focus on.  They have much more chance of surviving by focusing on one area of the business, where they are strongest, than continuing to spread themselves so thinly.  They may also be able to spend more time looking ahead and anticipating change rather than being distracted by a business that became too diversified for its own good.

There is no easy answer for HMV, but one thing is for sure, its centenary will see a very different business, or none at all.  The latter may be the most likely if you consider the US evidence of how many businesses last for 100 years.  There are now 1000 of them it seems, only 0.01% of all US businesses.  Worryingly for HMV, two thirds are private companies and only 10% are in retail.

Mark
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