Download victims: is HMV next?

HMV storeReaders interested in the software market will be aware that Game had a nasty brush with administration the other week. It's been rescued and the fact that 3000 jobs have been saved is unalloyed good news of course. It remains, though, dependent on a market that's being edged out by downloads. As is everyone in 'boxed' entertainment. Which leads to the question: is HMV next?
It should be stressed that there's no immediate threat and in spite of a bad Christmas nobody is predicting the immediate demise of HMV. AOL Money contacted them for comment and there has been no response but there's every chance that's just timing.

There has to be a question about the long-term durability of a business whose main speciality is slowly being eroded by the download market, though. HMV's business still seems largely concerned with selling music and movies; Ben Parfitt, news editor of specialist online games magazine MCV, concedes that it wouldn't actually occur to him to buy a music CD any more (indeed WH Smiths has stopped selling them, at least in its branches).


The games market isn't quite so straightforward, though, he explains - and it's here that companies like HMV could score well. "There are downloadable games on mobile phones like Angry Birds, which cost 69p and you can be playing them in minutes," he agrees. "But there are other factors with more traditional console games. Call of Duty is a 5-10 gigabyte game, and there have been Playstation 3 games of up to 30 gigabytes."

This is clearly a non-trivial download, even when we're all on 4G networks. Even if the size were overcome as a factor there are other reasons people will still want to buy from some sort of shop. Parfitt says there are two schools of thought on downloads: one that they'll take over completely and the other says people still enjoy the act of shopping so retail premises will still be needed.

Numbers games

Then there's the pricing issue. Popular belief has it that things get cheaper if you go online and you can see the logic; prices must surely shrink as the overheads go down? The answer is surprisingly not necessarily. "If you buy a game online in download form it tends to be at the RRP," says Parfitt. So if it's RRP'd at £44.99 that's what you'll pay, and never mind that Asda has it for £30.

This is still a bit of an incentive to get it 'boxed' rather than downloaded. The other factor affecting this is of course the second hand market. Many people take their games back to a retailer and get a discount on the next game - the pre-owned market is significant. With games costing around £30 a shot if you're lucky this is an understandable way of keeping the expenditure down.

And it's something you can only do with retailers, downloads by definition can't be returned. Now, there are rumours that the next generation of consoles will be able to tie themselves to a disk - so if I buy a game, play it then pass it on to you, you'll only get a demo and have to pay for it all over again. This hasn't happened yet, though, and the idea of being able to resell complete games is something that helps many gamers sustain their playing habit.

This is an area in which the entertainment specialists excel. Parfitt says: "Supermarkets like Asda do offer the same service but we've tried it and the staff just look at you blankly. It's very hard work exchanging a game there." He doesn't blame the staff. If people aren't trained, they won't know what to do and it's not their fault.

There should logically, therefore, still be a good opportunity for HMV. It's announced scaling down and then scaling up of its game activities, it's said it wants to become more of a gadget shop - it's aware its core market is changing. But as long as people want advice, as long as they need staff who know what they're talking about and assuming HMV puts the training hours in it might yet have a better Christmas 2012 than it did in 2011.
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