The iconic music and movie retailer HMV has confirmed this week that it intends to appoint administrators. Whilst HMV will continue to trade and seek a purchaser for the business, things are not looking great.
HMV’s 239 stores in the UK have entered last week a month-long sale with 25% off prices, as the company needs to liquidate stock after poor Christmas trading and The Financial Times has reported that key suppliers, including music labels and film companies, have declined to help HMV with funding so that it could continue trading. Clearly music and film companies no longer think that HMV constitutes an indispensable distribution channel…
This Wednesday brought another bad news in the same industry sector, with Blockbuster UK confirmed to go into administration, putting into question the survival of its 528 high street video rental stores.
Frankly, these recent events are hardly surprising. The demand shift from physical goods to digital goods in the music and movie industry has been obvious for years, led by iTunes, LOVEFiLM, Netflix and their peers. For instance, publicly available data (as reproduced below from the 2012 US music sales report by the Nielsen Company) shows the evolution of the digital market share of music albums and track equivalent assets sold in the US since 2008:
As you can see, the Digital distribution channel overtook the Physical channel for the first time in 2011. You don’t need to be clairvoyant to be able to spot the trend here. HMV’s and Blockbuster’s management can’t possibly say they didn’t see that one coming…
In their defence, they are not the only ones who have failed to adapt their strategy in this changing environment, as attested by a number of recent high-profile demises of UK High Street retailers in other industry sectors, as summarised in a BBC article:
- Camera chain Jessops also went into administration last week
- The last Comet stores closed in the week before Christmas after the electrical retailer ran out of credit
- JJB Sports went bankrupt last year; with rival Sports Direct buying 20 of its stores but the remaining 133 closed in October
- Clinton Cards went into administration in May; a US company later bought the brand but 350 out of a total of 784 stores closed
As the French saying goes, “le Malheur des uns fait le Bonheur des autres” i.e. all is not lost for everyone. In this case e-commerce players are amongst the obvious beneficiaries of the High Street’s mishaps, with the following companies springing to mind, in respective order:
- tlc-direct.co.uk and electricshopping.com
- amazon.co.uk and milletsports.co.uk
- 123greetings.com and someecards.com
And in HMV’s and Bockbuster UK’s case: the big winners are iTunes, LOVEFiLM, Netflix and Spotify… That’s the effect of disruptive innovation in practice, you can’t have omelette without breaking eggs (another French saying for you!).
So who do you think will be the next High Street casualty? I’m looking forward to reading your best guesses in comments below!!