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HMV Canada cuts prices, considers streaming music, rental videos
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The Toronto Star- Beleaguered music and movie retailer HMV Canada says sales are up since it changed its pricing structure.
It’s looking at launching the country’s first subscription-based digital music service next year.
And it’s considering a move into movie rentals as a way to boost future revenues.
There’s a hole in market since video rental retailer Blockbuster Canada filed for bankruptcy, HMV president Nick Williams said in an interview.
Blockbuster failed under the weight of its U.S. parent’s debts, but many of its Canadian locations were profitable and will soon be coming on the market, he said.
However, Williams cautioned discussions are at the preliminary, internal stage. “Nothing’s been decided.”
Like other traditional music and movie retailers, HMV is under pressure to change its ways as more people buy and download entertainment content from the Internet.
The Canadian unit was sold last spring by its debt-laden U.K.-based parent, HMV plc to U.K.-based Hilco for $3.2 million.
The British-based turnaround specialist, which injected another $25 million into HMV’s Canadian business, has its work cut out for it.
On the music side, Apple iTunes has taken a big bite out of the market, while on the movie side, new services like Netflix and YouTube are making it easier to download content over the Internet.
Still, the majority of movies and music are still purchased in their physical form, according to independent data.
Toronto-based market research firm, Research Solutions Group estimates as much as 65 to 70 per cent of music is still sold as CDs, while 93 to 94 per cent of all movies are sold or rented as DVDs.
However, some analysts believe traditional music and movie retailers’ days are numbered.
“The idea of devoting that amount of retail space to displaying empty (video rental) boxes would seem to have gone. There are just too many other options,” said Joshua Gans, a professor at the University of Toronto’s Rotman School of Management.
“There’s so many other sources emerging right now,” said Emily Taylor, a technology analyst with IDC Canada, including online video services provided by cable and satellite companies, like Rogers and Bell ExpressVu.
HMV is pushing back with new pricing and plans for new services.
Currently, 40 per cent of its sales come from DVDs, 30 per cent from CDs and 30 per cent from general merchandise, such as headphones, T-shirts and books.
The retailer now offers CDs and DVDs on promotion at one of three price points: $5, $10 or $15, instead of selling two for the price of $20 or $30, a strategy that forced consumers to find two discs they liked in the same rack.
“We’re treating customers like adults,” Williams said.
The move has helped boost sales of discounted items in its 119 stores across Canada by 30 per cent, while the number of people passing through its doors has swung from minus 12 per cent to plus 10 per cent year over year, he said
“The bottom line is we have found a price point that our customers like and we are seeing visits and purchases increase because of this pricing - every retailer’s ideal formula,” Williams said. “I’m feeling very optimistic about Christmas.”
The company is also looking to launch what it says will be Canada’s first subscription-based digital music service.
Unlike iTunes and other services that charge per track, HMV would give customers access to as much music as they want for a flat monthly fee, Williams said.
The service, which could launch by next March, would initially be available to the 800,000 members of Pure, HMV’s loyalty program, he said.
But perhaps the retailer’s most interesting and counterintuitive idea is a move into video rentals, a market it feels is underserved now that Blockbuster in liquidating its stores as part of a bankruptcy filing.
HMV was reportedly one of the retailers that made a bid for Blockbuster while it was in restructuring in court-ordered protection from creditors
The receiver, Grant Thornton, rejected all offers and is now liquidating the assets and closing the stores.
A complicating factor was the fact the Blockbuster name in Canada is owned by the Dish Network LLC, the company that bought Blockbuster’s U.S. parent company.
Dish, which is the United States’ second largest satellite TV service, says it’s interested in entering the Canadian market, though it’s unclear whether it would open stores or offer a digital movie business.
“We haven’t announced any new plans yet. We’re certainly looking at new opportunities in Canada. Whether it’s a store or an online service, it’s in the exploratory phase right now,” Dish spokesperson Marc Lumpkin said in a telephone interview from the company’s Englewood, Colo. headquarters.
Dish recently launched a subscription based digital movie service under the Blockbuster name in the U.S. It’s currently available to its 14 million Dish Network subscribers.
Dish continues to operate 1,500 Blockbuster stores in the U.S. and another 1,500 outside North America.
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