A few thoughts on the new difficulties faced by HMV.
In part this is response to some utter nonsense I’ve read online, and some of the news reports surrounding HMV heading into administration for the second time in five years.
There are undoubtedly structural problems with how music is sold in 2019, but I think there are multiple reasons for HMV’s failure – regardless of any mistakes or management decisions taken by their owners.
I’ve tried to examine each of these in turn.
We’re obviously moving away from a music ownership model to a rental model, although I’m still unconvinced that this is sustainable in the longer term.
Firstly, it is not yet profitable for the businesses that are doing it. OK – that might not matter for Apple or Google who have vast income streams from other parts of the business that can prop them up, but it does matter for companies like Spotify and Tidal. Indeed, even Apple or Google will shut down a division that simply doesn’t make sense after a while.
The lack of profitability might be a temporary thing, and perhaps the business models will improve over time. But let’s put it this way, I wouldn’t even begin to attempt to get into the streaming market right now. And will Apple or Amazon at some point stop even selling downloads? (Thank goodness for Bandcamp!)
However, as I’ve argued previously, the current music rental model simply doesn’t work for a large proportion of the population.
Consider my father. He buys or gets given one or two CDs a year. In all probability any discs he buys come from a supermarket – for him, the only easily accessible physical outlet for music now. He listens to those CDs a fair amount. But there’s no way on earth that he’s going to spend £120 a year on music. Nor are an awful lot of people. Certainly, Spotify has a free tier, but that’s ad-funded, and my father no more wants to hear ads interrupting his music than anyone else does. The alternative is that perhaps the majority of the population stop purchasing music altogether!
The most recent RAJAR Midas survey suggest 24% of the population listen to on demand music services, while Ofcom’s Technology Tracker suggests it’s closer to 29%. Either way, that’s 70% of more of the population who don’t use such a service.
So, we need some level of music ownership. That means an ability to buy music.
One of the things that frustrated me was a report that used vox pops of various people standing outside the Oxford Street branch of HMV explaining how they hadn’t bought a CD in years and that they streamed everything now.
Vox pops are, to my mind, nearly always useless. They are completely unrepresentative of the population, and more often than not, just colour a report to say what they the reporter hoped that they’d say. We never know how many vox pops were gathered and which ones made the cut. Think of it this way, if you stood in the street ahead of election day, asked two people how they were likely to vote, and got the same response: “I’m voting Green!” You wouldn’t then go on air and suggest that the Greens were going to win with a landslide (Unless you were in Brighton).
Physical sales have undoubtedly fallen as streaming revenues have risen, but the IFPI Global music report 2018 still attributed 30% of recorded music revenues coming from physical sales (CD and, to a very small extent, vinyl) compared with 38% for streaming and 16% for digital.
In the UK, we know that sales are falling. The BPI says that 2018 saw 32m CD sales down 9.6m year on year. But if 70% of the population don’t have an account with Spotify or its peers, then there still needs to be a way to allow listeners to buy The Greatest Showman soundtrack or George Ezra’s latest CD (the biggest two albums of the year).
Physical music sales are still worth £2bn, and HMV accounts for 31% of all physical music and 23% of DVDs and Blu Rays.
So, there are plenty of people still buying CDs. Indeed, I note that recent deluxe boxsets from both The Beatles and Kate Bush are only available in physical form. The streaming versions of both sets have significantly fewer tracks. That said, these are clearly aimed at collector/completists and the cynic might think that the labels are wringing as much cash as possible out of those now distinctly middle-aged fans.
Most people aren’t streaming their music, and while they don’t buy as much as the keener music fans, these are consumers who still need to be reached – selling rather than renting them music.
The Vinyl Fallacy
Hitherto, the best place to buy music has been a record shop. Yes, there’s Tesco. And yes, there’s Amazon. The former has a very limited offering – and no, I don’t really care about the cool vinyl selection your big Sainsburys superstore has. That’s “cool” because it knows its customer. In the DVD aisle you’ll find boxsets of Airwolf and The Persuaders. All of these are because they’re serving a generation that got old, and buys these things for nostalgia reasons.
The vinyl resurgence is all very well, but while the percentage increases might have been massive (the growth was much smaller in 2018), but they are still dwarfed by CD sales. Don’t just use revenues as your comparator, since vinyl invariably costs more than the equivalent shiny disc.
A record shop in 2019 can’t really just exist by tapping a niche market like vinyl. Perhaps in a big city like London, but London has all kinds of shops that are unsustainable outside big cities. For example, there are shops where you can buy film processing gear. That doesn’t mean a largescale resurgence in film photography is likely. These places instead serve a diminished marketplace, but there are so few other outlets left that they mop up enough business to survive.
Music is a mainstream art form, and it needs to survive in a manner that is accessible to all, regardless of their access to big cities. More and more, that probably does mean a combination of Amazon and supermarkets, with niche outlets filling a small hole.
The Loss of Curation and Serendipity
The real challenge for the true mainstream audience is music discovery. It’s all very well having a Spotify playlist, but for the “70%” who don’t use a streaming service, they’re probably relying on the radio (90% weekly reach recall), or perhaps mainstream TV shows like Graham Norton or The One Show.
I’ve long argued that computer algorithms are still no match for a carefully curated shop display or the simple act of stumbling over something you didn’t even know you wanted. (A good radio station and/or presenter of course is massively valuable too.)
One of the joys of a record shop, is the stumble-upon factor. You look at a shelf of new releases, or a thematic display somewhere, pulled together by someone who likes music. And in there, you find something that you didn’t know existed, or didn’t even know that you wanted.
I’m not naïve. I know that stores sometimes charged for those shelf-end displays or front of store racks, but either way, I can’t begin to think about how many times I just found something I didn’t know I’d come in for just by seeing it on a rack.
Compare and contrast to every digital offering I’ve used, where the search box is the primary mechanism for digging into their warehouse. Yes, Amazon has more music than I can listen to in a lifetime, but they display it abysmally. If I know what I’m looking for, I can [probably] find it. But nobody “browses” at Amazon.
I recall spending many a lunch hour at the Oxford Street HMV browsing film soundtracks looking for obscurities and just seeing what they had. You’d find an Ennio Morricone compilation you didn’t know about or whatever.
Over on Amazon, I can see what’s selling the most, but that’s about it. They probably have that exact same compilation, but unless I already know about it, I’m never going to find it.
Maybe Spotify might lead me to it somehow. Maybe not. I find that most algorithmic playlists are far too constrained musically and don’t explore the wider breadth of what’s out there. You like this guitar-based rock-band? Here’s another guitar-based rock band.
Browsing is one of nature’s delights, and it just doesn’t work on the virtual shelves.
The British High Street
We all know that the UK high street is changing rapidly. In some parts of the country, they’re becoming ghost towns. When a larger store closes down, smaller stores follow, and shops get boarded up.
On the other hand, store rents seem to sail inexorably upwards. The high price of rents is often quoted as a reason for store closures.
It’s never entirely clear to me how this can be. There’s surely a dynamic market, and a landlord you would think would prefer something rather than nothing.
But inevitably we hear that the real issue is that Britons are spending more money online and no longer shopping on the high street as they once did. Every year, the volume of shopping online creeps upwards, and big brands either fold altogether, get sold to Sports Direct owner Mike Ashley, or announce that they closing a number of branches.
However, there are still some things that don’t quite add up.
Over Christmas we heard that online powerhouse Asos had suffered from severe discounting across the market, which led to poorer than expected profits.
And while online sales are indeed rising, reaching 21.5% of all retailing in November 2018, that still leaves an awful lot of sales that are not online.
This suggests that even with a retailer whose majority of sales are in-store and not online, the growth of online can put the store part of the business into loss even though it still accounts for the majority of sales. Indeed, the volatility of some businesses to even small declines in sales would seem to back that up. Sometimes that’s because they’ve over-expanded and borrowed on the basis of sales that only head upwards. Or maybe it’s because the owners have grabbed a lot of money out the business…
Anyway, this is just another reminder that next time a clothes brand on the high street shuts down, and you see a vox pop on the news with a contributor saying that, no, they don’t use the high street any more, and that they only shop online for clothes, in fact 78.2% of textile and clothing sales are not online.
There are no easy solutions to any of this. I truly hope that HMV continues in some form over the coming years. It’s just one of a narrow set of places that the more casual music consumer can actually buy music. I would hate to be limited to just what my local Sainsburys stocks.
But we should also be wary of overly didactic reporting that suggests that “everyone” has moved to streaming. While the biggest music fans may well have done, the average consumer does not stream their music. The problem is that high street stores can’t rely on not getting their custom for 11 months of the year, before they pop in December to pick up an Ed Sheeran album.
There seem to be more structural problems with the retail industry. Rents may be increasing, but many chains have over-expanded, and it would seem that even the smallest fall in sales can lead to dire consequences.
Being a music snob doesn’t really help anybody. You may be lucky enough close enough to Rough Trade or whoever, and enjoy their brilliant curation. But most of the population doesn’t. London can support such shops. Small towns all over the country can’t.
I’m not a muso although I do buy and listen to a reasonable amount of music. I have a streaming subscription, but I also buy CDs and mp3 downloads. The first record I ever bought was in HMV. I loved going there on Saturdays examining the singles chart in great detail, and later flicking through the albums. There was an independent music shop on the opposite side of the road that I also enjoyed. But the local department store also had a record section, as did WH Smith and Woolworths. All were part of my Saturday trawl.
Later I would spend far too much money downstairs in HMV on Oxford Street, or upstairs in the DVD section.
Just after Christmas I popped into an HMV in Norwich to pick up a Blu Ray of Leave No Trace a film I’d missed in the cinema but which has been popping up on loads of “Best of the Year” lists. I could have streamed it, but the quality of physical media is better, and the disc was actually cheaper than some streaming services. (It’s a fantastic film by the way, and fully deserves its plaudits).
I will miss HMV if it is to finally leave high streets for good.