How has 2008 been for HMV in terms of sales and customer satisfaction?
As our results over the past six months show, our trading has been decent considering everything going on with the economy, and we’ve been holding our own against the competition.
Games have helped drive this trading performance. This is in part due to the stream of quality releases that have been coming out, but it also reflects HMV’s own substantial investment in the format.
Games and technology products now account for just under a quarter of all our sales, putting it roughly on a par with music turnover, and I suspect it won’t be long before video games start to edge away.
Are you confident HMV can beat the current economic slow-down?
All retailers are finding the economic environment challenging to say the least. Clearly no company can be immune to such pressures, although I’m hopeful that the entertainment sector is well placed in being able to withstand the worst effects of the downturn.
I believe consumers realise that products such as CDs, DVDs and games offer tremendous value, especially as prices have come down in recent years.
Do you foresee a time where you will scale back your DVD and music business in favour of games?
It’s a fact that demand for recorded music, at least in physical form, is declining. However, the recent launch of our MP3 service means that our digital business is finally in a position to grow – so music will continue to be important to HMV in some shape of form for years to come. Ask any member of staff, and they’ll tell you that music is in our DNA.
DVD accounts for about 45 per cent of our sales, and while it’s fair to say the market has matured in recent years, Blu-Ray offers the opportunity to re-energise it.
However, bit-by-bit, games are moving out of the bedroom and into the living room – which represents an opportunity for us given the reach that we have.
Fortunately we’ve been able to grow our games proposition without undermining the integrity of our core music and DVD offers. Games sales are set to pull away from those of music, but it will take quite a while longer for the same to be true for DVD.
Following your recent acquisition of Gamerbase and the move into pre-owned, are you now ready to compete with the likes of GAME?
The short answer is yes, though we still have a little way to go to match them on share and market penetration. We’ve actually thought of ourselves as being a games specialists for a while now, but given our recent move into pre-owned and the Gamerbase acquisition, I hope this will be seen as the ‘last piece of the jigsaw’ of a comprehensive and compelling games offer.
It’s particularly important that publishers and distributors see us as a specialist, as I want them to appreciate the potential that HMV can offer them in expanding the market.
Consumers no longer buy CDs, DVDs and games in isolation – the chances are that the same customers will want access to all three. We’re in a unique position to open up the games market to the millions of customers of all backgrounds. However, while our offer has a universal dimension to it, it’s implemented in a specialist way.
What has been the biggest challenge in your Re/Play range?
I’m proud of how we have developed and implemented our pre-owned offer. All parts of the business have contributed in some way. It’s been a great company effort, especially at a time when there is so much else going on.
Obviously, there have been many things we’ve had to think about, but the key challenge has been to get the in store operation and IT just right so that Re/Play fits in smoothly into our wider product offer – especially in the run-up to Christmas, when there are so many people coming into our stores. We’ve also needed to bring our partners along on this journey, and to support the offer with a compelling marketing communication to make it stand out in the marketplace.
Have you encountered much opposition with Re/Play?
Not as much as some reports suggest. Of course, it was met with a bit of a mixed response in some quarters, but we made a point of keeping our key partners up to speed and involved. I’d say they’ve been broadly supportive, as they understand it was something we had to do – especially as our key rivals already have a pre-owned offer.
I’d say to any doubters that I firmly believe Re/Play will help open the market to the wider customer-base that comes into our stores, and that we all stand to benefit in the long-term.
The recent price-cutting has been quite severe. What are your thoughts on this situation?
I’d caution everyone against the vicious price deflation that we have seen in other entertainment sectors. Once you start on a downward spiral it’s hard to stop it, particularly as it feeds consumer expectations who just keep wanting premium products for less. You just end up devaluing it in the eyes of consumers and undermining the aspiration that rightly exists around purchasing it.
Finally, how do you visualise the future of the gaming industry?
We have an optimistic view of the gaming industry and its future prospects. We feel the market can continue to grow as it increasingly connects to a wider, more mainstream audience, especially as publishers have shown they are capable of delivering even more amazing product and content.