Music & video specialist HMV UK’s latest results indicate that its troubles are far from over, with revenue declining to £325.3 million.
The popularity of Spotify and Apple music show no sign of slowing, and this does not bode well for HMV over the coming years, as it will struggle to find its place in the digitised sector. Yet, it has the potential to benefit from the popularity of streaming services rather than oppose change – with its good standing in the sector, it could create or link up with a music streaming service, allowing it to effectively boost sales and rejuvenate its proposition.
To date HMV operates from 128 stores around the UK and Ireland, and this year it has continued to invest in its stores by improving layouts and offering live performances in an attempt to drive footfall and highlight the appeal of physical music and film. While its main threat to market share comes from online pureplays such as Amazon, the convenience of grocers is also a threat, with retailers such as Asda and Sainsbury’s still offering broad instore ranges of physical music and video at competitive prices.
The most worrying aspect of its performance is the decline in operating profit to £11.7 million – evidence both of overly heavy investment into stores and payments to sister companies.
In spite of this, HMV directors appear to remain reasonably positive, suggesting that it has adequate resources to continue to operate for the foreseeable future. However, it will need to do more than make do in the future, if it is to return to the glory days of its past, it must drive profitable sales of physical media at its stores –a tough ask – while simultaneously creating a viable online streaming proposition.
Footnote: HMV UK is not associated with the HMV business in Asia.
- Zoe Mills is an analyst with Verdict Retail.