HMV has had a great 2009, with the closure of two of its main rivals in the UK, Zavvi and Woolworths, its been able to posture itself as the only real mainstream music, film and game retailer on the UK High Street. Along with this new commercial reality they have been able to focus more on their games portfolio and grow on the back of the expansion of that market.

However, they know as well as anyone, that as we continue to move into a world of digital downloads their business model will slowly evaporate. Music, as we know, can now be downloaded or streamed directly into devices, whether it be Nokia ‘Comes with Music’ phones, the Iphone/Itouch family of devices or games consoles which are now starting to push full price product through their online distribution solutions.

Hence they have invested and purchased 50% of 7Digital a UK based online retailer and distribution solutions company. 7Digital is an online retailer which also has a music streaming service. It is yet to turn a profit and is operating in crowded market place alongside companies such as Spotify (streaming) and Itunes, Amazon and many others for downloads.

This deal with HMV is wider than just music though. HMV also owns Waterstones a leading book retailer which in recent years has been trying to find its way in the digital world, playing ‘catch up’ to Amazon. 7Digital’s technology and services will allow HMV to launch an online book store and leverage the audience 7Digital already claims to have along with the current consumer base HMV and Waterstones have access to.

Yet, why go to their store? What USP will it have? Itunes were the first and their software and hardware combo are superb. Additionally they now sell a wealth of other content through the Itunes store which again gets nicely organised into their software. Amazon and Wallmart sell everything you can think of online and their music stores are there to add value and perhaps pick up extra sales. They have been very successful. But why go to the HMV/7Digital store? Will they have exclusive content? Will there be some unique software that makes their experience high value and too good to miss for the educated content consumer?

Im doubtful, and I would imagine that to some degree the HMV management are yet to come up with the answers. Perhaps the aim is to provide back end services to other businesses that want to sell content and not focus on a direct to consumer relationship themselves. As one of the last large ‘content’ retailers on the high street it will be a fascinating 5 years to see how they manage to progress from being in the physical world of business to moving to an online proposition.

Perhaps their overall strategy is to hedge their bets and add value to HMV so that they become an attractive purchase for another company, perhaps a hardware manufacturer who needs to add a digital distribution element to their business model. This would be similar to when Nokia bought Loudeye a digital music service, which then evolved into the Nokia Comes with Music proposition. For example, if Sony bought HMV, they would overnight gain access to a music store, ebook store and physical stores, some of which could be shut down, and others transformed into their versions of the Apple Store equivalent.

The Beatles: Rock Band will be out on the 9/9/09 and its already been reviewed on multiple sites. They love it. Its the same old music, many of us already have, remixed and mastered as part of a game or game format many individuals already have and enjoy. What is interesting is that box sets of the same remixed and remastered recordings are being released along side the game.

Which will sell the more copies? Which will generate more revenue for the labels and publishers? This will be a huge milestone if the game does significantly better. It won’t be the start of a trend, far from it, but due to the historic nature of the content and act it will be a marker, a confirmation of all that we have learnt over the last 3-5 years.

Over the same time period new Ipod Touch products will be released. These may be nothing more than the same as the new (well not, so new now) Iphones, with faster CPU and graphics along with the cameras enclosed. However there has been speculation that along with a tablet type device (the jury is still out as to whether it will see the light of day) a new form of music purchase will be announced. A package of content, which includes videos, perhaps lyrics and who knows what else. Im still of the thinking that it might include some kind of Garage Band (the software for Macs) inspired tool for remixing tracks, as the actual individual instruments and vocals would be sent. Why pay for remixes when you can in effect get your audience to create them for you!

So will this be the month or even year where the music industry puts its hands in the air and recognises that whilst the music is important, what consumers want is interactivity but interaction with compelling content? Watch this space.

Its been a while since we updated this blog. That is not because there is a lack of news in the music industry! Far from it! However it is simply because we have been pulled in different directions by the industry itself. At the moment there any tons of opportunities to make money and pursue new audiences in the music and sound sectors. Indeed the creative industry sector is expected to grow over the next 5 years, and that despite the global economic downturn. 

Does this mean the times are good for everyone or even that the money you can potentially make from your ‘art’ and skills is of a high volume? Well lets tackle those two questions.

Times are clearly not good for everyone in the creative sector. As we know large record labels are failing, indeed they have been for sometime. However the recession is accelerating the rate at which their old business model is dying out. This is due to a number of factos such as:

• People having less money on non essential purchases, such as music
• When they do want to buy music, they want it for less (same with films, see the crash in DVD prices!)
• Other industries which might have utilised music as part of their model, and hence are a customer of the music industry’s are trying to pay less, as they are making less. Ad funded websites for example.
• Recessions are time when people invest in new businesses with new models, and the record labels do not represent this sector of business.
• Some of the record label’s mother companies, which might have once absorbed their losses for strategic reasons are themselves losing money. Sony for example. Hence that puts more strain on any part of the overall business which is shrinking or failing, the music part for example. 

Our first podcast episode of 2009 is now online. HERE

We are pleased to welcome Simon Young back to the show. Remember to subscribe at Itunes, OR with your RSS reader. Lastly remember you can email us at podcast@musicresearch.com or make contact via this blog.

Steven