Why HMV will die and how they could have survived


hmv oxford

Not much music in the window. They filled it with a display for Oasis' Don't Look Back in Anger single in 1995. Those days are gone.

HMV is the last recorded music retail outlet left in the UK high street. Over the past few years we’ve seen the demise of Our Price, Woolworths and Virgin Megastore/Zavii. Now, for the very same reason HMV are closing around 60 stores.

People usually blame the demise of our record shops on technology and the rise of iTunes and Amazon. But I believe there’s a deeper reason why the high street shops have failed.

The fact that it’s more convenient to buy music online is a misnomer. We’ve all fallen into the trap thinking that ‘convenience’, speed and price are the only factors involved in a purchase. That is of course true with a commodity. With a purchase that is not a simple commodity, price has little baring because its the buying experience and the added value that is important. This is how the music industry has played the biggest part in it’s own death, by stupidly turning music into a base commodity.

The rot started in the mid 1980s when the music industry began the great compact disc swindle. They persuaded us to buy all the music we already had on vinyl, citing the better quality (which wasn’t quite true) and the better durability (which wasn’t quite true) and the fact that the new medium was smaller and therefore more, ‘convenient’. Because it was smaller we lost the experience of the album cover art. Because CD singles and albums were the same size we lost the specialness of both mediums. Because it was so handy and cheap it was quickly devalued and able to be given away free with magazines. The digital nature of the encoded audio and availability of CD burners meant it became easy to duplicate. By removing all the awkwardness and weaknesses of the vinyl record, they had transformed recorded music into a cheap, valueless commodity.

12” long playing records or a three minute 45 rpm single are completely different objects to the equivalent CD. They are bigger, heavier, have bigger almost poster-like artwork. They are fragile. To play a vinyl record you have to remove it carefully from the sleeve, place it on the spindle, lift the needle into place. After 3 or 20 minutes or so you have to lift the needle again and turn the disc over. With vinyl you are engaged and that’s the key: listening to music is an experience, not a commodity.

In the mid 1980s, Our Price Records changed their name to Our Price Music because they were now stocking tapes and CDs. They somehow felt they weren’t ‘records’. A small point but a relevant one in the separation of ‘music’ from the medium it came on and at the same time from the experience. It’s interesting that new bands, even today, stubbornly refer to their product as ‘records’ not CDs. A compact disc or vinyl disc is the medium for the ‘record’, which is the important thing.

At this point in an argument like this people usually cite the old chestnut of the ‘march of progress’ and the ‘advancement of technology’ and that we shouldn’t live in the past but embrace the future. This is rubbish. If technology was more important than experience we would not have restaurants or cooking, we’d just take a variety of nutrition pills. We would not have clothes fashion, we’d all wear silver fabric jumpsuits. The experience is important and that’s what we cling onto. That’s what we pay for. That’s why cinema attendance has never been so high even though it’s more convenient to watch DVDs at home on your 40” TV. That’s why music concert and festival attendance has never been so high when we can all put our iPod headphones on an listen to whatever we want whenever and wherever we want.

The irony is that the secret to the safe survival of the music industry was right there all the time, inside the music industry with the songwriters and musicians that make new music. The technology involved in recorded sound has advanced unimaginably since the early 1960s and yet all new rock bands that start making music aim to make that music using methods and technology that goes back 50 years. That’s why rock bands play guitars that may be newly manufactured, but their design and set up is a facsimile of the instruments that the Beatles, the Stones, or Led Zeppelin all played. In the 1990s VOX amplifiers brought back their old fashioned looking range of amps because all the bands wanted their stage to look like what all the classic bands stages looked like. Amplifier manufacturers ditched the advanced electronics and transistors to return to the values and tubes of the 60s because the musicians wanted that authentic value sound. And of course every rock band wants their records to be released on vinyl.

Of course not all new music follows this pattern and amazing sounds and new forms of music have been created with new technology too. The point here is that the music industry failed to realise that all music is not the same. The dance halls are filed with electronica, young girls fill their iPods with the latest pre-fab teenybopper and festival goers want their bands to be live and authentic. These are just three types of music which are created and consumed in completely different ways by different types of people for different types of people. And yet HMV and the like tried to sell it all in the same way, and when that started to fail they filled their shops with DVDs, computer games and iMacs, betraying the music audience they used to serve and appealed to no-one.

It’s probably too late for a single company like HMV to recover, but it’s not too late for the music industry. They need to re-discover that music is an experience. Some of those experiences can be packaged and sold at a profit and some cannot. They need to stop treating all music as the same thing. The genres are consumed in such different ways and yet the only way they’re differentiated in a music shop is by having their CDs in a different rack.

High street shops have something that iTunes doesn’t have: a physical shop that you can walk into. Music shops (and bookshops) seem to moan or panic as if such an advantage is a noose around their neck. If retail was dead, how come Apple Inc. opened their hundred or so shops worldwide and get a footfall of almost two million people per day for products that is easier to buy online. The answer is that they have created an experience that you can’t get online.

If the music shops realised that certain genres of music have an audience that would relish having a shop experience they could have transformed their retail units to accommodate them. By getting rid of all products that people would rather buy somewhere else they could have re-stocked vinyl records (a niche but growing market). They could have hosted classic album listening sessions. They could have hosted live bands. They could have built a model around the long-tail (selling many different obscure materials rather than stocking just few obvious titles). They should have realised that the markets these ideas would appeal to have the money and inclination to want it. It would mean abandoning the X Factors, Pop Idols and the charts (you can’t compete with the commodity of the download) and embracing an older audience. It would mean only the music genres that have the strongest experiential and lifestyle elements: possibly including new emerging urban sounds, some types of dance, classic rock, blues, jazz and folk (basically all the music forms created from the ground up by people, not manufactured to a formula by music industry management).

They say you can make excuses or you can make money, you can’t do both. The problems any business faces today can’t be blamed on technology or changing markets, or government policy or the world banks. They can only be blamed on an inability to creatively change the business model to follow the money. The reason businesses can’t cope with change is that their stuck in one way of thinking with an inability to be more creative when solving business problems. That’s way those record shops have gone. It’s not because people don’t want music or don’t want a shop, but because the shops failed to supply the experience the audience wanted through stubbornness, greed, ignorance and by keeping on doing what they’ve always done and expecting different results.

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15 comments on “Why HMV will die and how they could have survived

  1. Great article Ayd. Sadly, most retailers focus on cost saving – rather than value. Hence the expansion in self-service tills that reduce the retail experience to being worse than online – there is not even the advantage of dealing with a pleasant person.

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  2. Agree with your article. My local HMV used to have a sound-proofed section where the classical music was which was a haven away from whatever other music was piped throughout the store. Then suddenly it disappeared and that stopped me from going into that shop. I would think they wanted footfall and not to cater to what they would perceive as niche.

    Homogenisation of stores and the high street is the bane of modern life. I much prefer smaller, more personalised shops than high street chains that are same shop, different town.

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  3. Nice try, but if it was that easy…. essentially what is prescribed as a solution is simply what independent record stores have been doing for yonks, but it hasn’t stopped them, too, from having to close down.

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  4. Hats off to the Indies who are still open – yes – some of them are doing good stuff (See The Truck Store, Cowley Road in Oxford, http://truckmusicstore.co.uk/). But most are just record shops that might sell gig tickets. That’s not what I’m saying. It has to be more.

    HMV could have done it precisely because they’re NOT independent – they have a national chain – with large stores and a real chance to have been able to provide for and create a live music/music lovers community.

    They would have the power to pull in major artists in-store, put a coffee shop in (yes, they work) rather than a walk-in-bargain-bucket poor shadow of Amazon.

    HMV have regressed into 1980s style retail.

    Look how well Apple have done in making a computer and gadget shop into an art gallery/community/event location/personal service venue.

    Look what Starbucks have done to the mundane idea of drinking coffee: they became meeting places for friends and people with laptops.

    HMV could have done their equivalent and really stepped up to create a profitable space for buying music in all its forms.

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  5. I think you’re engaging in overly simplistic and wishful thinking. Taking your suggestions in order:
    1. Pulling major artists in-store: Imagine the scale on which this would be necessary for a national chain of music stores in order to make a significant contribution to bottom line. How many stores does HMV have? How many artists would you need to pull in to each of those stores, and how often, and for how long each time, in order to make a real difference? And who would go and what would they buy when they got there? HMV used to (maybe still do if they still have their Oxford Circus branch) pull in major talent to the flagship store from time to time on maybe a weekday evening, but what did that really do for the bottom line in even that store, let alone stores in Norwich, Nuneaton, Northampton, in other words the other 99% of the portfolio? And what kind of artists are you looking for? If you get pop artists in, you’ll just get a load of kids of school age coming along, spending nothing and then maybe downloading the stuff off the internet, most likely for free, on their mobiles. If you get MOR/AOR artists, well, most of the folks who listen to that stuff probably haven’t set foot in a record shop for years, maybe decades, and they would anyway probably be at work, on the way home, or at home when the artist was in the store. It’s a great idea to create a buzz around any retail store, but whose buzz and how do you monetise it sufficiently to rescue a dying retail model?
    2. Coffee shop. Hmm, we all like coffee shops don’t we, so why not combine a music store and a coffee shop? Well, that was tried in the basement of the Virgin Megastore on Tottenham Court Road and it didn’t save that particular establishment even with the advantage of space that that particular store offered. So if you have a coffee shop inside a music store how does that work exactly? Because having a coffee shop inside a book store has been tried (a la Borders on Oxford Street) and that didn’t work either, even though you would presume it to be a more natural fit. If you want a coffee shop, open a coffee shop. You can’t straddle both stools IMHO. What are you going to do, blast music at people whilst they drink their coffee? People go to a coffee shop to talk quietly not to be bombarded by music that they don’t like.
    3. Okay, Apple. Apple have an incredibly high margin on their products, both percentage wise and in absolute terms. Apple can very well afford these stores. Apple products are all about beautiful design and excellence in functionality. People go to the Apple store to feel the products, to test them out, to experience them. This is important with each new release or new iteration of a product, because otherwise you would be reliant on a friend/colleague having the new product in order to experience it. Now compare this to retailing music. Music is a) cheap, b) very low margin in both percentage terms and absolute terms c) easily experienced (listened to in advance of purchase) online. There is simply no equivalence between Apple retail and HMV retail.
    4. Starbucks. This is a coffee shop. It’s just the same as a pub but without the alcohol, and without the stigma of going on your own. Cafes have always existed. What is the difference between a Starbucks of 2012 and a cafe of 1982 really? I mean, a real cafe, with a barista? Nothing. The whole cafe culture thing has infiltrated its way into our habits, but without any discernible reason other than we saw people like Chandler, Rachel, Joey etc. drinking coffee in Friends and all the rest of it. But I digress. Starbucks is a coffee shop. They sell coffee. And sweet things. And light snacks. Pretty much the same a a cafe always did. Wooden floors. Wooden tables. Decent coffee. Baked goods. Light snacks. Nothing new. Actually yes, two new things: a) wi-fi (maybe) b) expensive coffee c) syrups d) not paying taxes

    I applaud your trying. And maybe HMV could have tried harder but in the end I doubt it would have made that much difference. One would like to think that there must have been something they could have done, but really, they are to downloaded music as the telegram was to the telephone.

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  6. The fact is HMV did nothing to improve their business model. The ideas listed above may or may not have made any difference, but they didn’t even try anything and now it’s all over.

    J, it’s good that you’ve gone into so much detail, but it’s all a bit ‘why it won’t work’ and a bit neg. We’re lucky in that we have no vested interest (or at least I haven’t), nothing to lose or gain and little experience of that industry. So our purpose here, my purpose in this blog, is to try to explore what could work, be a bit more imaginative, a bit more creative and think a little bit more positive, especially than those that ran HMV.

    So while poo-pooing my ideas is par for the course and fair dos – what other suggestions are there? I still maintain that people (music fans) would have bought into a high street music hub, if it was run right, along the lines of the examples I’ve mentioned.

    That’s why the high street is just coffee and clothes shops now because those are two things, experiences and services that just don’t work well on-line. So if any shop wants a presence on the high street they need to think hard on how to do that otherwise they too will go the way of Jessops, HMV, Comet et al.

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    • I hear what you are saying, and you sound like an optimist whereas I would say I’m a realist. You almost certainly consider me a pessimist but that’s your prerogative :-)
      For sure, I would have loved to have been given the reins at HMV and to be honest, who’s to say I wouldn’t have tried some of your suggestions, for desperate times call for desperate measures.

      Realistically, given the following facts:
      a) high rents, which are very likely in most cases subject to upwards-only rent review clauses, signed as they probably were before the credit crisis hit in 07/8/9
      b) high exit costs from those leases
      c) high business rates (some would call them extortionate, compared to other countries) which have gone higher in the £ to compensate for the fall in rents generally across the UK since 07/8/9 (the tax man still wants his pound of flesh and not 1/32 ounce less)
      d) the relentless decline in sales of physical media
      e) the low margins of physical media
      f) huge debts (I have no idea how their debt pile has built up over time, maybe you could shed some light on this for I would be interested)
      g) all the other stuff already mentioned

      HMV were probably always screwed. Their best bet always was administration/bankruptcy/whatever as long as it allows them to exit their lease commitments and most if not all of their debts, and try to move on in a slightly different direction, maybe doing or trying to do some of the things that you suggest, or maybe not.

      When all is said and done, the costs of running a retail business in the UK are I think astronomical even absent a huge debt pile to service, a shrinking market for your goods, wafer thin margins and all the rest of it. Ideas are great, but creativity and lateral thinking whilst necessary, are not sufficient of themselves to make a business such as HMV, pre-administration, work. .

      HMV did try some things, apparently, among them juice bars and overpriced headphones. Anyway, I wish them the best of luck from here.

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      • This is interesting:
        http://www.bbc.co.uk/news/business-21028024

        It also interesting to learn this week that the music industry have kept HMV going for years, pumping money in, fearful of losing the last physical shop for product.

        I suspect when we look back in a few years time, we’ll see the error being something like the entire music industries lethargy and luddite understanding of digital back in 2001. HMV (or EMI, or Woolworths or anyone) could have launched an ‘iTunes’. But they didn’t. A computer manufacturer did. Except of course Napster et al actually did it first, illegally, and perhaps should have been embraced, but were vilified and the opportunity to beat Apple was lost forever. Heads have been in the sand for a long, long time.

        (I’m not even an optimist, I’m a fantasist – I still think the big mistake was abandoning vinyl and moving to CDs…)

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  7. So they put a cafe in the one in Cambridge and waited to see if it would work. It shows that they were really strapped for cash by then as well as being risk averse. They could have experimented with cafes years ago when the likes of Marks and Spencers did (when they were at deaths door) and do it big. But that tiny plan from last year was too little too late. I really don’t think they’d even need hindsight to see that trying to survive by selling DVDs and games was a really crummy idea. Loads of commentators are now saying that they should have consolidated and re-focused on music. Better to make drastic changes to survive than to soldier on to bankruptcy. Why did everyone think that except the company themselves… I think it comes back to the same story we’re finding all over retail that there’s a serious lack of imagination and passion in these bean counter run businesses.

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    • You’re right, there is probably a serious lack of imagination and passion where it is needed. But again, you choose a flawed example of another business – in this case M and S – to illustrate your point. Just as Apple could do what HMV could not, because of reasons mentioned above, M and S were able to put cafes in their stores because a) their stores are huge, b) they already have a reputation for excellence in food, c) they appeal to mainly women, and mainly older ones at that (part of their problem with their clothing sales), who quite enjoy having a cup of tea and a cake (or whatever) in between doing a bit of shopping, both within M and S and outwith..
      HMV on the other hand, have a) largely small stores, just big enough to sell records from (because that was the purpose for which they were originally selected) b) no reputation for anything other than sticking gazillions of cds in cd racks c) an appeal to…well, I’m not sure who shops at HMV any more to be honest.

      We will never know if it would have worked had they done it sooner, but I doubt it. More than anything, the stores are just too small to accommodate all the paraphernalia required to run a decent coffee shop, unless you think a kettle and a couple of tables counts as a coffee shop.

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  8. I know we’re going on about coffee which is probably a red herring… but yes, http://truckmusicstore.co.uk/ in Oxford is doing it right. They only have three tables. They even have bands in there and it’s TINY. But they’ve become the centre for Oxford music, live, festivals, CDs, big on vinyl, new local releases and so on. HMV in Oxford have a massive store. Full of junk. They could have handed over the entire space to Truck and made a profit. There is a big music and even bigger student scene in Oxford (obviously). The kids don’t want to hang out in M&S so where can they go? Could a music hangout have been invented? Obviously it would have to meet massive rental costs as you’ve already pointed out. Maybe the idea wouldn’t work in all towns. I just bet it would have done in some and they could have closed the rest. But it would have required bigger thinking and a big change in their business model. In the end you have to move where the money moves. It moved well out of their comfort zone. We’re trying to contrive the situation by hoping to combine music (which does make money in some forms) with retail (which might not). HMV decided they were a retail entertainment business not a music business. It didn’t work. Would going the other way work? I’d like to have thought so, but it must have looked too niche for them to consider.

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  9. Very interesting article and discussion with J. You both make good points.. Perhaps the issue is about what your customers want/need and what you sell, why and how you sell it.
    Clearly in the age of computers a company selling slide rules or abacus is going to struggle and so they have to adapt and re-evaluate their market. Putting a cafe in their store and selling their products as antiques or curios might actually work for a small number who can position themselves for the niche market.
    However for the larger business with many outlets they are going to have to adapt more radically by listening to their customer’s requirements carefully. Perhaps they will do a deal with Apple or Orange and provide an electronic product with the dexterity and ease of use of the abacus, but with the flexibility and intelligence of a hand-held computer… An unlikely scenario, but I think you get my drift.
    Speaking of drifts… off to build a snowman :-)

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  10. I personally prefer CDs, and the cost of entry for putting together a decent quality system *is* much cheaper for CDs vs. expensive tonearms and needles. I don’t care about the top-end pricing, or which is ultimately better. I feel like CD isn’t the problem at all here.

    More likely to me is the loss of awareness label cachet (4AD, Sub Pop, etc.) due in part to all the mass media sellers (I include HMV, but when did you last see ‘search/sort by label on Amazon or iTunes?) and the lack of retailer knowledge in the subject their customers are interested in; most of the kids I ever tried to talk to in HMV had a kind of tunnel vision for their favourite band/genre, and there was little to no help from the row upon row of music which was so lacking in granularity that they thought putting Rock and Pop in the same section was a good idea.

    There was simply no difference in service between HMV and Amazon, and it’s easier to research your tastes on line, so what was the point in driving in, paying to park, and paying extra for the same mass produced item?

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    • CD I suppose started it…the route to easily copyable music. When CDs came out, there was no such thing as the internet (we are talking, what, 1987?) so mass distribution of pirated music was not an issue. The only issue was copying of content from mates, or of stuff borrowed from the library, most often to cassette (ha, remember them).
      The rise of the internet, mp3s and torrents and what-have-you have done it for CDs and purchased music in general. Supermarkets moving in and selling the top 40 albums for a pittance added to the blow to traditional music retailers like HMV and Virgin, who presumably used sales of top 40 content to subsidise their provision of everything outside the top 100 – something the supermarkets had absolutely no interest in.
      It’s all very sad, because at the end of it music has IMO become seriously devalued. And, although I have no doubt that there is good music out there, and always will be, I feel that there will never be as much good music as existed before the advent of the aforementioned events. Certainly in the (what is now) less mainstream dance genre I think the demise of vinyl as the single standard release format for independent dance music labels (of whatever hue) has led to a shocking drop in quality.

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