THE BUSINESS OF MUSIC www.musicweek.com
NEWS ELECTION 2010 Industry confident of music’s position as UK goes to the polls
DIGITAL THE NEXT LEVEL Spotify, eMusic and we7 talk to MW about their next steps
7 76 13 6
7 7 6 6 6 9
FEATURES SPRINGTIME FOR FESTIVALS
The festival business is racing towards summer on the back of strong ticket sales
HMV CEO Simon Fox is not convinced about US retail giant’s entry into UK CD market
HMV aims to burst Best Buy bubble
Retail By Ben Cardew
HMV CEO SIMON FOX HAS THROWN DOWN THE GAUNTLET to new UK upstart Best Buy after questioning the idea that the British public will trawl to out-of-town electrical stores to buy their CDs.
Fox’s stance comes as Best Buy launches its bid for the UK’s music retail crown at the same time as HMV reveals mixed financials that indicate the entertainment market is not quite as rock solid as he would like.
With an offer of around 1,500 music titles in its first UK store, Best Buy head of entertainment Marc Spence has already identified HMV as his “key competitor” (see page 3).
However, HMV’s Fox – whose background includes working as managing director of electronics retailer Comet – is not convinced or unduly threatened by Best Buy’s plans to open up to a further nine stores this year, despite posting figures that saw sales slump in the first three months of 2010.
“They are an electrical store,” says Fox. “I have been an electrical retailer and in my experience the British public doesn’t want to travel to outof-town parks to purchase their CD requirements. It is different in the US, where there are no high-street chains.”
“I wouldn’t want to underestimate them but in terms of com pe titiv e threats, they are not the biggest threat out there,” he adds. “What is the biggest threat? The biggest opportunity is making sure we play a big part in the digital world, remaining price competitive online with the biggest online players.”
HMV reported sales at its UK and Ireland stores up 7.2% year-onyear for the 52 weeks to April 24, but down 2.4% on a like-for-like basis. Fox and his management team also endured a torrid last financial quarter: sales were down 8.2% at its UK and Ireland stores for the 16 weeks to April 24, or down 13.2% on a like-for-like basis.
Nevertheless, profits remain on track to meet market expectations, with analysts predicting a figure of around
£74.5m for the year. This is up more than 15%
on last year or 50% on three years ago.
“This is a good strong profit but this final quarter was always going to be tough,”
The HMV CEO identifies three reasons for this – the poor weather in the first few months of this year; a very strong first quarter of 2009, when HMV benefited from problems at other retailers; and a slate of new releases that was not as strong as the first part of last year.
Music sales were not broken out in the HMV figures, but Fox explains, “We feel comfortable that we have held our market share of the physical market over that period and going forward we look with some optimism to the line-up that is coming ahead of the key Christmas period.”
Key initiatives at HMV this year include the launch of new bespoke areas in-store concentrating on fashion and artist merchandising, plans to improve synergy with Mama Group, which it bought earlier this year, building its digital business and pushing the Pure HMV store card.
Nevertheless, HMV’s plans will take place against an expected 10% year-on-year fall in CD sales, according to Fox. “That is a realistic basis on which we should plan the physical side of our business,” says Fox, whose mood will not be improved by Best Buy opening its first UK store in Essex or its apparent warm welcome from the industry.
The launch of the Thurrock store on Friday, selling 1,500 music titles alongside DVDs, games and electrical products, is the first of up to 10 openings planned by Best Buy this year.
But the knowledge that one of the biggest music retailers in the US is clearly going after a market dominated by HMV does not concern Entertainment Retailers Association director general Kim Bayley. She says, “It is good for retailers to have competition in the market or they get complacent.”
Warner Music SVP, commercial, Raoul Chatterjee also says the move shows “there is a significant amount of life” still in CD sales.
Best Buy is the first significant arrival on the UK’s physical music retail scene since Zavvi in 2007, although that was a result of a management buyout at Virgin Music. email@example.com
Festivals furious as the bill for policing costs soars
THE ASSOCIATION OF INDEPENDENT FESTIVALS is urgently calling on Britain’s top police organisation to review the way it charges festivals and other music events after a rapid hike in policing costs over the last few years.
The AIF move (see live news, page 8 and feature, page 14) follows the unearthing of a confidential document compiled by the Association of Chief Police Officers (ACPO) showing how and what police forces should charge festivals for providing security cover.
In this weighty report West Midlands Police director of finance Derek Smith sets out a number of complex principles and charging methodologies, which festival organisers had previously been totally ignorant of.
However, since setting eyes on Paying The Bill: ACPO Guidance On Charging For Police Services, promoters are livid that the police body is suggesting police should be paid £55 per hour – well above rates charged by private security firms.
That has meant many festivals have seen their security bills at least double because they are also being charged the maximum overtime rate available to police officers, plus travel time and even pension costs.
AIF chairman and CEO Alison Wenham says she is “very alarmed” at the document because it appears to class all music festivals in the same category irrespective of their size, location and the age of the music fans attending.
Wenham and others are also incensed that ACPO has priced officers available to police festivals at a higher rate than those at football matches or any other outside event, including the demolition of buildings and parades.
“ACPO seems to suggest that football matches represent a much lesser risk to the public than music festivals,” Wenham adds.
Loud Sound director Jim King, who produces events such as Creamfields and RockNess, also slams the charging policy, which only came to light after the police chiefs’ body forwarded its 46-page guidance notes to the Department for Culture, Media and Sport, which asked key stakeholders to consult on it.
King says the police are charging for overtime as a matter of course and also suggests there should be a clear timescale for the police to provide both a breakdown of their costs and their staffing plan.
He says, “Imposing costs with officer rates this high will become a massive barrier to entry for new events to our industry. A lack of new promoters with new events and ideas will cause the industry serious problem in the medium and long term.”