HMV eyes digital future as music sales hit bum note

HMV GROUP is to scale back its stock of CDs and DVDs in favour of “a rapid expansion into personal digital technology” and more activity in live events, it said yesterday as it announced a £123 million (€136 million) full-year loss.

Sales in Britain and Ireland HMV stores open for at least a year declined almost 15 per cent in the year to the end of April 2011 to less than €1.1 billion.

The troubled retailer described its performance as “disappointing and unsatisfactory” and said it hoped to have 150 stores reconfigured by Christmas so that a quarter of the floor space is reserved for technology products.

HMV has already begun the process of dedicating prime space to consumer electronics, at an average fit-out cost of £40,000 per store. Earlier this year, its Dublin Grafton Street store shifted the A-Z music CD catalogue to the basement, making way for higher margin accessories.

HMV chief executive Simon Fox said global CD sales were declining at a faster rate than DVDs and noted that some consumer electronic companies were no longer making CD players.

HMV cited forecasts from market research firm Futuresource, which expects the physical music market to decline in value by 17, 20 and 24 per cent over the next three years, by which point sales of digital music will have overtaken physical CDs. However, CDs still represent a quarter of HMV’s sales and the company will not completely abandon the format, Fox added. “You can’t wrap a download for Christmas,” he said.

HMV has lost market share in DVDs, which account for 44 per cent of its sales, and it expects further declines in this market over the next three years.

The retailer hopes to expand its links with music festivals under the HMV Live division, for which it is targeting an operating profit of about £10 million.– (Additional reporting: Bloomberg.)