HMV launches digital music store, competition is greatly intensifying

hmv-logoThe once top retailer of music CDs, HMV, has struggled in recent months facing intensifying competition from digital retailers, and peer-to-peer Internet networks where people illegally share their music free of charge.

The result has been a significant decline in earnings for traditional brick-and-mortar retailers, such as HMV.

The HMV stock (LON:HMV) has lost a significant amount of its value in recent months, reflecting slumping earnings and lost market share.

In early 2009, the HMV stock peaked at almost $150 per share, compared to a mere $61 per share today.

The stock remains volatile, with a wide spread in the 52-week low and high of $50.60 and $128.10, respectively.

The company hopes to become more competitive, announcing the full launch of its new digital music store dubbed HMVdigital, with partner company 7digital.

HMV Group holds a 50-percent stake in the partner firm, following a GBP 7.7 deal last September.

The company says it currently has a library of more than 10-million songs available for download, with select popular songs and albums being offered at discounted prices for a limited time.

More and more traditional retailers are seemingly shifting their traditional operations and core competencies to that of the Internet.

For example, Blockbuster is facing intensifying competition with chief rivals such as NetFlix, who now offers unlimited HD direct movie streaming over the Internet for one low rate.

NetFlix even announced it would be launching in Canada some time this fall.

Additionally, there are also many competitors in the digital music store market who are beginning to offer additional features that are in high demand from consumers, and now, even offer one monthly price for unlimited access.

That seems to be where the market is heading: a single low rate for unlimited access to online media.

For example, Spotify, offers DRM-free unlimited music for $15 per month, with the ability to share files on social networks and to access music from any Internet computer or mobile device.

Apple is rumored to be preparing its own unlimited single price feature in its hugely popular iTunes digital media store, but will probably not launch in the short-run as the company would maximize revenue.

The top search engine in the world, Google, has even launched its own iTunes competitor; simply enough dubbed Google Music, that is currently available only in the U.S., although some consumers, even in the U.S., would boldly claim that they already use Google to get their music.

This business model that is slowly being forced by newer entrants could mean squeezed profits for both the retailers and artists, but the reality is, given how CD sales are tumbling worldwide, both the retailers and the artists will either have to somehow add more value to physical albums, or just have to accept the lower margins in the Internet age.


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Hercules holds a B.Comm Finance from Ryerson University in Toronto, Canada. He is a Chartered Financial Analyst (CFA) level 3 candidate. He was previously a contributor at FiLife, a finance website owned by Dow Jones and IAC. Write to hercules@business2press.com
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