Tuesday, March 13, 2007

Q: What's The New "Record Biz" Paradigm? A: Consumer Electronics and Social Networking!

HMV, Britain's top music and entertainment chain, is in trouble.

But they have a plan...
The company's stockprice fell 11.29% in morning trading to £1.35 ($2.60) on the London Stock Exchange, after the company warned that trading conditions have "deteriorated further" since its most recent financials warning in January.

The merchant levelled particular blame at the performances of its affiliates overseas and its Waterstone's bookselling chain, and notified investors and the media that it expects total music and DVD markets to decline further.

"The markets in which we operate are undoubtedly very challenging," commented group CEO Simon Fox. "Waterstone's and HMV are great brands, but have not adapted quickly enough to the way customers are now buying and consuming media. Our performance has suffered as a consequence."

The company says its board has taken a "cautious view" for the seven weeks until the close of its financial year, and it now expects full-year profits to be below the current range of market expectations.

"The three-year transformation plan which I will outline today is exciting, radical and far-reaching," Fox says. "There is a great deal to do and I have every confidence that this plan will turn the business around."

As part of its strategy, HMV has identified a three-point area of focus across its U.K. business, comprising a mantra of cost savings, protecting its core business, and growing new channels.

The company said it planned to achieve cost savings of £40 million ($77 million) each year by 2009/10, through a string of initiatives including the simplification of the HMV U.K. supply chain, and a review of its store portfolio in Britain.

Also, a new HMV store "format of the future" is in development, and is expected to be tested in Britain this fall. Moving forward, HMV U.K.'s outlets will carry a broader, enhanced range of portable digital products.

And in an innovative new media project, the retailer is to launch a social networking site for music, film and games aficionados. The SNS will provide revenue streams from advertising, sponsorship and paid-for content. Universal Music and 20th Century Fox have already struck strategic content partnerships, HMV says.
The idea that HMV will act as a social network seems, well, umm, a bit contrived. Social networks not only provide end-users with items of value, but what is appealing is that they do so because these end users not only negotiate the terrain, but they contribute to it, muck it up and mold it. Record stores are notoriously unuser friendly. In many cases, places like Tower Records, perhaps my favorite chain of all time, seem to rely on expert knowledge as a way to overcome less-than-friendly service and design.
Which isn't to say that record stores were staffed by people who mocked the very people that put money in their pockets. Only some of them. The others would be staffed by people who offered "service" but, in reality, were simply friendly faces who knew very little about what was in the stacks (Wherehouse comes to mind as one such place). So how HMV will act as a "service" is something that ought to be interesting since, if it worked, it could act as a paradigm for other retailers who are moving away from recorded goods and into other domains.

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