His Master’s Voice: About To Choke?
Jane McConnell @Janemcconnell : Future Artists Original Essay 1/2/11 (Update coming soon)
EXPOSURE TO THE STREAM of doom-impending headlines would make it easy to believe that the death knell is nigh for HMV.
With no official gauge of public reaction to the possible loss of the company, there has been an interesting lean towards keeping up shop – a world away from the Napster attitude of 1999, where the £15 high street base price for a new CD was the enemy. In 12 years, we have come full circle and apparently decided that nostalgia for the friendly giant charging £8 a pop is a more appropriate reaction than figuring out why the closure of 60 stores is happening, how we got here, and what this implies for music and music sales within the next five years.
Others Vs. HMV. HMV Vs. Amazon?
Swooping in where Virgin Megastores, Zavvi and Woolworths died, HMV has emerged as the market leader – a leader with little competition where physical shop fronts were concerned. VM closed down eighteen months ago: but US HMV closed down five years ago.
Still confident in its position, HMV took advantage of the seemingly epidemic closure of its rivals and in the years previous, independent music shops across the UK. Old disc formats – vinyl, second hand rarities and promotional discs for the mega fans – lost their profit pulling power in comparison to playlist music made available in more and more locations, such as supermarkets.
So, having taken over the independent chain Fopp in 2007, HMV may have then become the dominant in music sales. But with HMV’s future being questioned by the shareholders who do not want to cushion any falls in profit forecasts, it had at that moment, also managed to stab itself in the back. Why?
From Whom is the Master’s Voice?
Despite having done well in retaining Fopp’s independent, specialist values during and after the takeover, it often feels like Fopp is just an addition to the superstore’s property portfolio – and (previously better) net worth on the stock market. But HMV forgot to develop its own specialist values.
Take Manchester’s main HMV on 90-100 Market Street. The city store has undergone a number of refits. The latest incarnation features an Orange phone bar in the centre of the ground floor; with clothing rails encircling it and a framed photograph concession on the first floor. Electronics and games have their own sections too – both of which are readily available in game-specific stores electrical stores just a ten minute walk away – all adding up to an acute identity crisis that has seen HMV attempt to become the Amazon real-life.
Arguably, rather than tailoring the store through its buyers and local labels, the stock in HMV stores across the UK over the last ten years became increasingly ubiquitous from town to town. The chain was only able to sell the more unique items through special orders. It is to these special orders that Amazon now caters so very well.
Yet there is wide debate as to the rivalry posed to HMV by Amazon. The latter may be a valid opponent in the case for mp3s, but in terms of physical product, Play.com is in fact the real opposition, having been en guard ever since offering customer free delivery on all orders.
The Digital Natives Vs. HMV
This fragmentation of the music market began long ago, when peer2peer networks defied the very foundation of any business model – product for profit – in favour of sharing. The spoilt brat construct of the buy-everything culture began to crumble.
Social networking and the digital natives have changed the buying landscape. So firstly, P2P gave way to product sharing. The very opposite of one of capitalism’s main tenets, these sites in the mid-nineties/early noughties shook up the artist-label-distributor-sale-customer line of consumption. Napster became the buzzword for illegal (and therefore cool iGen) online behaviour. But its original motive was never to steal revenue from an artist: it was to create a public space in which to find obscure bootlegs, B-sides and bootlegs. A nerd haven.
Amazon happened to be one of the first to create a business out of it, adapting to the new code of trade online.
But is it music piracy that is murdering HMV? Of course, it is the digital natives who, though sharing, butchered copyright protection; the little © which is protected by law, and ensures that the artist gets paid a bit of profit – after all the record label’s costs have been met. Is it actually an audience voting with its feet, that is murdering HMV?
“And although HMV launched hmvdigital.com, its first digital service, in 2005, [Simon] Fox [HMV’s Chief Executive] recently admitted opportunities to profit in digital were “sparse”, blaming this in part on “widespread competition from the free illegal market”.”
As ever, the high street behemoths were tardy to catch up.
The HMV download sales now pale in comparison to the rosy back pockets of Amazon, Play and iTunes – even if Amazon, this year, has fallen £100 million below its predicted profit gains, it still swept the board with £32.6bn worth of total Christmas sales.
Piracy has, in fact, overhauled the way we view digital downloads despite the industry’s way of creating mutually exclusive terms: illegal and legal download sites. Digital downloads are convenient, and always available. And they don’t scratch.
Of course, it helps that Amazon and Play are in fact tax-free outlets. This holy pair of the digital download market are long established as household names for a nation that increasingly finds itself riding on better bandwidths, cheaper computers and wider internet access which grows and improves by the day.
HMV Vs. The Artists
The digital natives are also changing the landscape as to how music is produced and distributed. By taking away the distribution middleman, bands can share their files on the internet for free if they wish, taking back the power of publicity through the inherently public nature of the internet. They can post through hosting sites such as SoundCloud, and make music available for free without having to adopt any extra, often unnecessary branding or even advertising.
The key with this is that SoundCloud can appear as a widget on a band’s site – a crucial difference in presentation when a band is looking to establish its own identity. In the same way that cults define themselves as the opposition to the outsiders; a band can create and control its own creative space, rather than becoming an end user of a pre-branded site such as MySpace.
HMV happens to be one of the only mainstream stores where independent artists and labels can seriously sell their records. Sounds like a cop-out, but in fact this is very important in a town where the local indie shop probably found itself mashed under the giant foot of HMV in the first place. Now that the chain has the responsibility of ensuring its audience are not deprived of what it took over, it seems they are tripping at the last hurdle: overcoming the gradual loss of the physical record as the most coveted object of purchase.
Technology over the last ten years has seen the desirability of the portable music device outweigh that of owning hundreds upon hundreds of CDs.
At one point, the circular disc was an almost mysterious object; a contradiction and yet (especially the vinyl) a hypnotic possession – the infinite shape with a finite number of songs which played as it turned. Over the years, that turning cylinder has got faster and faster until it transformed into digital 1s and 0s.
Perhaps the disc, on a psychological level, is like an instrument itself: the listener is not passive when they own one. They have to ‘open’ the music to begin (by opening the jewel case) and use special instruments to play (the CD player) in order to share the listening experience.
Yet it is this very psychological connection between the purchase, the physical musical product complete with lyrics, artwork, thank you notes and the actual songs that has corroded with the one-click mp3. The mp3 is now a package too: with lyrics websites and thumbnail images. For a generation which has been told from childhood that resources are constantly being wasted – trees, oil – it perhaps makes sense then that music is owned in its most purest form from the musicians, minus the other case-making and ink-printing businesses who for years have insisted that they, too, are part of the listening experience.
HMV may not disappear completely, though. With greater consumer choice provided by the internet, and the artist being given greater autonomy over the release of their work, we are finally beginning to see a change in the music market paradigm. People will always want to buy media; take part in culture. It is this which separates us from the beasts: the ability to appreciate an arpeggio, lust over the voice sprung from a heavy soul and the need to take repeated listens to the one song which just – fits.
Nevertheless, music recording and distribution is ever changing. Always has been.
And if you don’t change…
His Master’s Cashflow
According to the BBC’s Robert Peston in the 18th January:
‘I have been told by two music and entertainment companies that they can no longer get credit insurance for additional sales to HMV.
Here is an extract from an e-mail sent by the “head of credit and collections” at the UK arm of a major UK manufacturer and distributor of CDs and DVDs:
“I need to advise you that our credit insurers have significantly reduced our insured credit limit on all HMV entities. Based on the current HMV balances, the limit is not sufficient to support any sales on an insured basis moving forward.’
HMV apparently has 2 weeks until its next review by potential creditors – having already consulted KPMG for finance issues.
April will be the month in which HMV will see if it passes its own test under more controllable variables. For one, plenty of time will have passed following the positive working capital gained from the X Factor sales. Two: three months after the closure of 60 stores and the savings of £10 million will have already recompensed for whatever losses it suffered in 2010 – with either more money to recuperate, or enough to stay afloat. And three: the new financial year will begin in either red, or pink and black.
“HMV’s Simon Fox on transforming a retailer into an entertainment superbrand”, The Guardian, [http://www.guardian.co.uk/media/2010/jul/26/hmv-simon-fox-interview]<accessed 27th Jan 2011>
BPI: Digital Downloads Hit The Mainstream, BPI, [http://www.bpi.co.uk/press-area/news-amp3b-press-release/article/music-sales-dip-further-in-2010-but-digital-albums-hit-the-mainstream.aspx] <accessed 6th January 2011>