HMV Feels the Pinch

HMV has reported a sharp drop in profits following itís price reduction strategy, with most back catalogue priced at between 5 and 10 pounds. The strategy did however did succeed in increasing market share.

HMV and other traditional retailers have faced stiff price competition from supermarkets like Tesco and online retailers such as CDWow and Amazon. Reducing back catalogue prices is a good differentiation strategy (even against iTunes with its rigid set price structure) but the key area in which the supermarkets compete is chart catalogue pricing. Even the larger supermarket stores cannot compete with dedicated entertainment retailers for shelf space available for CDs. So inevitably the focus is going to be on chart items.

Iíve said it before and Iíll say it again, unless UK in store high street chart CD prices consistently go back significantly below the ten pound price point (e.g. 8.99) then weíll see the modest up turn in volume sales dip again.