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18.12.10 Music Week 3

sales are playing catch-up

The Ritz acquisition is a silver lining to HMV’s financial woes

HMV turns to live to enliven its latest financial results Xmas nears and even the south east it’s been gridlock for days,” he says. “I think it’s the major factor; I don’t think it’s a lack of quality as there are some good albums.”

His take is not shared, however, by Epic Records managing director Nick Raphael whose company has delivered two of the quarter’s most successful artist albums with JLS’s second set Outta This World and Olly Murs’ self-titled album, whose 108,212 sales a week ago was the biggest first-week tally by a debut album this year.

“Everyone will give you a mix of excuses: bad weather, Christmas starting late, the recession,” says Raphael who instead believes Q4’s steep drop in sales is due to the lack of quality releases in the market.

“There’s no lack of appetite for music. What there is is a lack of quality product to buy,” he says. “In these tough times the product has to be better than in easier times because if people are less affluent they are going to think twice about spending their money on your product rather than a DVD or game or app or having an extra night out with their mates.”

But he cites the example of Take That’s Progress as proving albums can still sell in huge quantities. “You put something brilliant in the market place people will buy it in droves,” he says.

Last week the Take That album became the first album in 2010 to reach seven figures and also overtook fellow Polydor release The Fame by Lady GaGa as the biggest-selling album of the year so far. paul@musicweek.com

The Chakras

Retail By Paul Gorman

HMV IS MAKING MORE INVESTMENT in its live division in a bid to turn around its fortunes in the wake of last week’s financial results which revealed the retailer’s CD sales had fallen 10%.

HMV unveiled pre-tax losses of more than £40m last Thursday, but tried to introduce some cheer by revealing it had acquired the famous Manchester venue The Ritz (right).

Chief executive Simon Fox hailed the venue acquisition as another significant investment for HMV in the UK’s live industry and says The Ritz will undergo extensive refurbishment before reopening in the first half of next year.

Fox has reason to be enthusiastic about HMV’s live interests, which were bolstered a year ago by the £46m acquisition of the MAMA Group. The live division was the standout performer in the group’s financials with recorded sales of £28.8m in the half year and an operating profit of £1.5m; like-for-like sales were up 7% at the 12 venues, including the newly-opened HMV Institute in Birmingham.

The only low in live was the debut High Voltage Festival staged with Classic Rock in July. That proved a damp squib with Fox conceding there were too many stages and artists. But he is expecting a better result in 2012. “Next year it will be much more focused and I’m sure will move into line with the rest of our live division, which is performing very strongly,” he says.

However, there was little gloss that Fox could muster to put on the performance of the group. In the six months to October 23 turnover slipped 6% to £749.5m and there was a near doubling of pre-tax losses to £41.3m. In the same period last year, pre-tax losses were £24.9m.

In part the flatlining sales have been blamed on the impact of cold weather and snow on customer footfall over the last couple of weeks, even though the figures relate to a period which ended a month before blizzards hit the UK.

More likely HMV has suffered – alongside every other retailer – from a below-average release schedule; already total album sales across the UK music industry are down an alarming 11.4% this quarter.

However, Fox does not offer this excuse and is holding out for a massive turnaround in fortunes over the next week or so. “There is everything to play for,” he insists. “We had a

HMV Group Financials

Source:HMV

Total sales 6% fall to £749.5m (£797.0m) Like-for-like sales 11.5% fall (+2.1%) Pre-tax loss £41.3m (£24.9m) (resultsfor26weeksendedOctober 23,2010,figuresinbracketsare changefromsameperiod2009)

tough first half, yet we held our market share, particularly in music, and the next few weeks are absolutely vital. I am convinced we can make significant progress in the days ahead with releases from Take That, Cheryl Cole, JLS and Westlife, as long as the weather holds.”

HMV says that the decline in physical music sales was offset by digital growth which reduced the overall music sales loss to 4.4%. Fox says HMV’s 50% interest in 7digital is already paying dividends in terms of technological delivery, though the contribution is very small in relation to the overall results.

HMV’s DVD turnover fell 8%, which according to Fox was a result of supermarket discounting. Games declined 12%, though this was contrasted by a 45% rise in sales for pre-played games.

With 412 HMV stores, 10 Fopp outlets and 311 Waterstone’s, operating losses at HMV UK & Ireland more than trebled to £24.3m from £6.7m a year earlier; the figures reveal the disposal of the historic HMV store at 360 Oxford Street achieved £13.75m.

Meanwhile, revival plans at Waterstone’s are on track with halfyear operating losses improving to £9.9m from £12.9m a year earlier, as like-for-like sales at the book business fell 3.2%. paulgormanis@btinternet.com

Photo: Sally Evans

Completing the bill were acoustic indie-folk twins Heathers, while there will be interviews with Boot and all the artists and their music plus interviews with some of the music industry players working with them featured in the Breakout Radio podcast released this week, available to stream or download at www.musicweek.com/breakout.

Entry is free for industry guests who email breakout@musicweek.com ahead of the event, while stable booths can be hired to accommodate groups of people.

Alex’s Wonderland looks for ‘next GaGa’

FOUR TIMES GRAMMY-NOMINATED songwriter Alexander Grant – aka Alex Da Kid – is looking for a label to back his Wonderland Music outfit as he ramps up his hunt for new talent to sit alongside recent signing Skylar Grey.

The Londoner wants to use his production company as a vehicle to create and launch the “next Lady GaGa”, but suggests this can only happen with the backing of a bigger team – from either an indie or major.

“I’m talking to everybody and anybody at the moment, but will probably not finalise anything until the end of January,” says Grant, cowriter of the Eminem/Rihanna hit Love The Way You Lie. “I want to make sure the team I work with is one that I approve of and am happy working with and there’s no point in signing something now, in case that changes in the next couple of months.”

Grant wants to keep the Wonderland roster contained and will focus on the careers of up and coming artists rather than songwriter-producers. Thus, next year will be spent building Grey’s career.

“Skylar is the one I want to focus on for the time being – my aim is to get her album out and then move on from there,” Grant says. “Of course if I spot the right potential with an up and coming writer or producer I will consider taking them on – but right now I want to focus on artists. Whoever else I sign up to Wonderland though will be someone I believe in 150%. It’s the same with any project I take on.”

Grant adds next year will also see him working with a number of “iconic and amazing” bands. “Most of the people on the list are proper A-list which makes it harder to work with them, but then when it does happen it is much more exciting,” he says.

IN THIS

ISSUE

THE BUSINESS OF MUSIC www.musicweek.com

NEWS HMV PUTS IT ON THE RITZ Live acquisition offers some solace for HMV amid latest financial woes

LIVE SPECIAL AGENCIES Agency Group’s US linkup to bestow Broadway and Hollywood clout

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18.12.10 £5.15

FEATURES

THE NEW CAPITALISTS Capital Network to take on the nation

Executives lose faith in Sky Songs’ strategy and model

Sky falls in as the plug is pulled on Songs service

Digital By Eamonn Forde

A CONFUSED PROPOSITION, inadequate and directionless marketing and a lack of label support have been blamed for the closure of Sky Songs, which will shut up shop in February.

BSkyB’s decision to reach for the off switch last Monday follows weeks of rumours that the first major music offering from a UK ISP was struggling. But high-level sources have told Music Week that Sky Songs’ fate was sealed several months ago at BSkyB’s executive level.

A source close to the service says, “Two things messed it up. The first is, they [BSkyB] didn’t know who to sell it to and had got the wrong proposition. The second problem was they didn’t know how to market it and had got rid of all the internal marketing people who worked on it from the start.”

According to those close to Sky Songs the service was beset with a series of problems predating its October 2009 launch. Sources suggest the service’s proposition was continually changing, even as the site was being built. This damaged it from the off because it meant the service, which offered customers unlimited ad-free streaming and five MP3 downloads for £4.99 a month, lacked the focus it needed to be in with a chance of success.

to its closure after only 14 months.

It is understood Sky Songs executives quickly lost faith in Omnifone, which powered the service. An insider claims, “There was not one week from launch that there weren’t massive gaps in the release schedule or dropped streams.”

Omnifone strenuously denies it was at fault and refuses to take the blame. An Omnifone spokesperson says, “BSkyB’s decision to close Sky Songs was a commercial one and doesn’t relate to the technological services provided by Omnifone.”

In a market dominated by iTunes for downloading and Spotify for streaming, Sky Songs also believed it did not receive sufficient support from labels. Indeed there is acceptance from some top execs that the industry d d d is, so why should a company like Sky step in and pour a lot of money into this to try and help labels?”

Another adds, “Labels were not bending over backwards to provide content at good prices.”

BSkyB’s failure to cross-promote the service to its huge subscriber base also undermined the operation with some suggesting the actual number of subscribers was a fraction of what the company claimed. “BSkyB needs to ask itself why it couldn’t reach more customers when it now has 10m [TV and broadband] subscribers in the UK. It’s perhaps because they didn’t tell any of them about it,” says one source.

Nevertheless, the closure of Sky Songs is a blow to the industry. MMF chief executive Jon Webster says, “It’s a great shame. It shows what happens when the customer is not listened to.”

BPI chief executive Geoff Taylor also feels the pain because the move comes just after the launch of the BPI Innovation Panel, designed to maximise the potential of both new and existing digital services. However, insiders say Sky Songs had already moved into a critical state by the time the Innovation Panel was up and ready in late October.

Taylor adds, “In any sector you get exits as well as entrants, but the d

Publishers on tenterhooks

Music publishers were waiting last night (Sunday) to find out if they had hit an X Factor jackpot by having one of their songs become the winner’s first single.

In previous years the same song has been recorded by each finalist ahead of the final, with the winner’s version then immediately released afterwards. In four of the last five years this has become the UK’s Christmas number one, with Rage Against The Machine famously breaking the run 12 months ago.

However, with the rulebook torn up and the four 2010 finalists recording different songs for their potential single for the first time, publishers with songs in the frame were having to wait with everyone else last night to see if they had landed what will become one of the year’s biggest-selling singles.

Those on tenterhooks included EMI Music Publishing, Warner/ Chappell and independent Chelsea

Distant Dreamer (EMI, Stage Three/BMG Rights) and Matt Cardle was paired with Biffy Clyro’s Many Of Horror (Warner/Chappell, Good Soldier Songs).

Chelsea Music managing director Eddie Levy says he is excited to be competing against the majors in the competition – and ahead of the final taking place was confident Forever Young would become a number-one hit, even if One Direction failed to win. He is already profiting from the show with Box Tops song Neon Rainbow from his catalogue being used as the sound-bed by show sponsor TalkTalk.

“It is a very exciting way to finish off the year,” he says. “The song has become one of the standard classic pop tracks of the last 30 years and One Direction’s cover will only help to cement its place for a new generation of fans. Even if the band don’t win the competition I am certain it will become a number-one

NEWS GUILLEMOTS AMONG UK TALENT AT MIDEM 5 Band aim to make splash at industry conference next month

MEDIA NEWS THE FIRST NOËL MAY NOT BE LAST OF ITS KIND 6 BBC Four plans annual genrespecific Christmas specials

LIVE NEWS CURTAIN RAISED ON AGENCY LINK-UP 8 Agency Group and Gersh deal to benefit artists

PUBLISHING NEWS BMG TO COMPLETE HAT-TRICK BY XMAS 9 Group remains cagey over prospect of third acquisition in six months

DIGITAL NEWS WILL ISPs EVER BITE INTO APPLE? 10 Sky Songs closure leads to questions about taking on iTunes

UNEARTHED FUNERAL PARTY

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LA trio’s album campaign under way

FEATURES RINGING IN THE NEW 12 Radio 1 to turn new year into a new-artist extravaganza THE NEW CAPITALISTS 15 A new national, cohesive strategy for Capital aims to give Radio 1 a run for its money JOY DIVERSION 23 A legal weekend rave in a car park is taking Manchester by storm SUPERSONIC 27 The Dutch/Belgian showcase is fast becoming one of Europe’s key events MANCHESTER TALENT CD 30