Where Now for Music Retailing?

UK media retailer has just announced that it will buy 14 retail stores from its struggling competitor Zaavi, which is currently in administration, following the collapse of media distributor EUK, which went into administration following the collapse of its parent company Woolworths which was also a key music retailer. Domino effect anyone? OK, things might not be as bad in many markets as they are in the UK, but a) the UK isn’t the worst hit b) other markets should look to the UK for what may be coming.

The overriding problem of course is that not enough people are buying music anymore and of those that are, many of them are shifting lots of their spending away from the high street retailers to online CD stores and to digital download stores. The harsh fact is that no high street music retailer has become a leading digital download store. Some have done better than others, but measure against the success of Apple’s iTunes Music Store, all have failed. They’re not helped by the fact that most digital download stores are an artifact of iPod sales. So selling in MP3 will help them (i.e. being able to sell to iPod owners), but they’ll still be hindered by their biggest problem: integration. No high street retailer has bitten the bullet and fully integrated their digital offerings with in store retail. The level of integration required should be so complete that it seriously threatens near term in store retail sales. Which is of course why it hasn’t happened yet. But if they don’t pursue such strategies soon, they’ll lose that revenue to other outlets rather than to their digital divisions. Meanwhile Amazon is setting the standard for integration. They could still go further, and they should, but they’re much further along this road than most of their bricks and mortar peers.

CD sales are in terminal decline. It’ll be a long prolonged death, so there’s still plenty of business in it, but succession and transition strategies need to be built around that basic tenet. The fact that music retailers are now media retailers (i.e. they sell DVDs, games, electronics etc) is indicative of the realization of where the future is. But aggressive digital strategies are key to retailers can slowing the music revenue share decline and turn it into channel shift rather than revenue loss.

Even though HMV’s revamped digital strategy isn’t as bold as it should be (yet anyway) another announcement shows their ambition: they’ve launched a joint venture that gives them a portfolio of live music venues. This is HMV trying to safeguard their future in the post-CD music business. Such a move isn’t available nor appropriate for all media retailers, but the basic assumption of ‘diversify or die’ is.

7 thoughts on “Where Now for Music Retailing?

  1. Great article that sheds light ont the industry as it is today and where it is headed. Unfortunately I’d like to see CDs stick around as they offer the best audio quality for mass reproduction to date. MP3s are ok but I hear a huge difference during A/B comparison. Heck, I still like analog tape over CDs but we won’t go there. I operate an MP3 upstart digital download store for independent local musicians. My goalsis to focus on live recordings in a mirco geograpghic area. Comments can be sent my way via; http://www.twitter.com/glenp

  2. I’m one of the CD generation too, though I was dragged kicked and screaming to that format transition. I listen to LOTS of music via LOTS of different digital channels, and buy single digital tracks to sample artists. But I buy most of my albums on CD and then rip. I can control the sound quality then, and I get to stick the cases on a shelf as I’m one of those old fashioned people who still likes to have his collections of physical media.

  3. But what are the three to five things a physical store retailer should do to have an “aggressive” digital strategy?

  4. 1 – Prominent marketing and access points all over store and marketing. ‘Can I help you download’ staff walk around store
    2a – In store digital / physical bundles #1: for a small premium, automatic download of album for CD buyers that have digital account
    2b – In store digital / physical bundles #2 e.g. buy this album on CD and get the last album as download for 50% off list price
    3 – On shelf digital retailing. e.g. plastic coated cover art with bar-code, taken to till, customer hands over along with ID card for digital account, music auto added to account
    4 – Digital listening posts (listen, swipe your ID card and have music auto added to account
    5 – USB downloads – take CD or bar code with accoutn ID card, to desk, request digital download to USB. Get USB with download

  5. The thing now is that video downloads will make it so that people are not even needing the album downloads! They can get the music for free with the video downloads. Most of those sites ALLOW the downloading, so it is not stealing. This is why the music artists are becoming more involved with the video sites.

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