INTERVIEW: Simon Fox, HMV

HMV is dead, right? That’s what some publishers and the Daily Mail think. So imagine Christopher Dring’s surprise when speaking to the firm’s very much alive CEO Simon Fox.

Last week MCV was in a presentation where HMV was talked about in the past tense, and some press think you’ve gone under. How do you react to that?

It is frustrating. We are a brand that journalists like to write about and our premature demise has been written about often, and that is destabilising for staff and suppliers. That is what our supplier conference last week was about. Putting the facts straight, reminding people we made nearly 30m last year, we just put in place a 220m facility. We are not where we want to be, but we are going to be around and we have a very clear set of plans that have to be delivered.

What was your message to suppliers at the conference?

What we need from our suppliers is to really step up and support us. Frankly, the games folk need to support us in the way film and music have done. They’ve been supportive of us, we appreciate that and it was important to us. We want to work closely with game suppliers and make it a successful season for everybody.

We had two conferences, one for suppliers and one for staff and they had the same purpose – to say we have been through a tough time and now it is about resetting our agenda, communicating our plans and starting the process of rebuilding confidence.

And what are those plans?

We spoke about our commitment to our core categories. Specifically with games we spoke about the need to have added value around triple-A releases, as there are some big titles coming up and it is going to be very competitive.

We discussed our commitment to keeping catalogue products on the shelves. We showed pictures of how we’re improving our store experience. We talked about bringing theatre to new releases in a more dramatic way. We do this well but there’s more we can do. Obviously we talked about the role of Re/play [HMV’s pre-owned offer] in driving new sales.

We talked about our plans to expand our in-store offering of technology devices. 150 stores will get a refit by the first week in October, with 25 per cent of space being devoted to tablets, headphones, speaker docks and the like. That’s a significant and rapid rollout. We talked about the training and marketing behind that. On digital we talked about the launch of a film service in partnership with Filmflex, which we will launch later this year.

But where’s digital games? You told MCV two years ago a download service was in the works, but there’s still no sight or sound.

It is tough in digital, as you know. We have made good progress on digital music. Waterstone’s made good process on digital books, and we haven’t sold our digital book business, we’ve retained that. We have a stake in a digital book business aNobii.com, which launches properly in the next few weeks. We just announced our digital film partnership with Filmflex. But you are right. Games have been slow to come. As yourselves say, it is about finding that point-of-difference and not just offering a me-too service, and that’s tricky.

Digital is obviously having an impact on games retail, but what do you believe is the big reason behind the severe sales slowdown we’re currently experiencing?

You’ve got a whole combination of things going on. We are in a mature stage in the console cycle. We have the explosion in tablet and touch devices, which are picking off casual gaming. We are in the middle of a challenging economic environment, and these are all conspiring against people’s ability to spend 30 to 40.

In what ways are you looking to capitalise on the big blockbusters this Christmas?

The challenge for us is making sure we get our fair share of these enormous franchises. It is obviously about building the pre-order plot, and we need to be better at that. We have always come into that on day of release and building the theatre around launches, but we have to do both better.

The message from the industry opinion makers is that entertainment retailers must change or die. Do you agree?

There is no doubt we have to evolve, and the other part of our strategy is to evolve our out-of-store offer. We made a move to buy into the live music market a year ago, and I am pleased to say that is going well. We recognise there’s a huge amount we can do in-store, which is absolutely our focus. But equally we have got to create an out-of-store offer and take the HMV brand into new places.

How are you expanding out-of-store activity for games?

There will be a gradual expansion of Gamerbase. We have Gamerbase pods in 70 or 80 stores, and I think those are fantastic places to showcase new or upcoming product in a controlled way. We are certainly looking to use Gamerbase more. But our biggest out-of-store commitment is to the live music venues.

You talk of live music, technology, in-store ‘theatre’, does that mean boxed entertainment is no longer your No.1 priority?

No, the No.1 priority is driving our store business, it is still by far the biggest part of our business. Although we hope live and digital will grow and become a bigger part of our business, our immediate priority is Christmas, peak season and making the most of our store estate.

The retailers thriving at the moment appear to be those focused on specific product lines, such as the Apple store. Have you ever considered being even more specialist?

That’s not our strategy. Our strategy is to be a entertainment specialist with music, film, games and now the devices that entertainment can be enjoyed. Apple is a manufacturer that also retails their products, we will sell Apple products but we will also sell other tablets. There is a role for the specialist and we are a specialist in the markets we are in. Are we going to narrow further? No. We focus on entertainment and that is our speciality, it always has been. That is the other thing we spoke about during our conference, we’ve just celebrated our 90th birthday.

Wow, 90 years.

I know. It feels like it [laughs].

In your financials you’ve often spoke about the pressure from the supermarkets. What kind of an impact have they had on HMV’s business?

You only need to look at the market share figures to see that they are having a significant impact on the games market. It is an area if you go back a few years that they weren’t focusing on, but now they clearly are. When supermarkets turn their space and firepower onto a product sector you would expect them to make an impact whatever it is.

How do you compete with them?

We need to find ways to add value where we can. We need to make sure the stores are as interactive and fun as possible. We have our reward card called Pure, where we can reward customers. And then we have Re/play, and a combination of all those, plus the convenience of the High Street, is how we’ll compete. But they are tough competitors.

Asda and Tesco have tried moving into pre-owned, but they don’t seem to have had the same success as you or GAME…
Supermarkets will sell volume of product because they are impulse driven. The customer is there for other reasons, they then see the game and can buy it. Pre-owned is more of a planned purchase. Trading in with us or others on the High Street is always going to be easier for a customer than trying to find somebody that knows what they are talking about in a supermarket. We have launched our Re/play app. We just need to keep on innovating.