This is why HMV is in trouble as it announced Ocean Terminal closure - Kevin Buckle
If bands are selling music directly to fans, the fates of FOPP and HMV are not surprising, writes Kevin Buckle.
With the announcement that HMV Ocean Terminal is to close following the news that FOPP in Glasgow – also owned by HMV – is shutting I’ve been asked several times why they are in trouble.
The answer is helped considerably by knowing how the deal for HMV was done by the Canadian Doug Putman of Sunrise Records.
As a sale became imminent Mike Ashley of Sports Direct fame and serial business buyer was the clear favourite. With the music industry trembling with fear, suddenly a white knight appeared who not only was prepared to keep open twice as many shops as other interested parties but also had the distinct advantage of not being Mike Ashley.
Doug Putman had somehow looked at the same figures as everybody else and had come up with a different answer. It transpired that while everybody agreed on the 50 shops still making a profit and the couple of dozen or so losing serious money Doug took a different view on the remaining 50 that broke even or thereabouts. These he decided could be turned around.
Other potential buyers including Waterstones had felt that all these shops would be losing money within a couple of years so best to start again with the profitable 50.
This relatively low number scared the music industry who weren’t prepared to gamble that where HMVs closed an independent might open, mitigating at least a small amount of the loss.
The final clue that all might not go well was when Doug announced how this turnaround was going to work for all his stores. He would sell more vinyl!
With 40 per cent of HMV’s business being DVD and Blu-ray, formats whose sales are now falling off a cliff, no amount of extra vinyl sales will fill that gap. The music industry, however, closed its eyes and hoped this was all just PR and there was a proper plan. There wasn’t.
All that is happening now is that reality is starting to kick in. Rents and in particular rates, which I know to my cost are non-negotiable, were known when Mr Putnam bought HMV and what he really means is people are not spending enough with HMV and FOPP in many cases to pay the rent and rates.
If you want to see a reason why fans are not buying from HMV you need look no further than the new album from Scottish indie rockers Twin Atlantic due out at the end of the month.
Helpfully, the band provide a link not only to their own official store but also to HMV and Amazon who are both selling the vinyl version of the album for £22.99. Meanwhile, for those fans who go to the official Twin Atlantic store not only are there a variety of options including bundles with T-shirts you can’t buy in HMV but also a signed copy of the album on vinyl is only £15.99!
Similarly virtually all the musicians bemoaning the loss of FOPP Byres Road had themselves had releases in recent times which in some way were not available to FOPP.
Only time will tell whether HMV can perform better than those other potential buyers predicted. So far the number of shops closing is far less than the extra shops saved, though of course that may change with time.
Whatever happens, what needs to be clear is that it is customers that will keep HMV going not a relentless attempt to reduce overheads.