The collapse of a major independent distributor and the demise of Woolworths lead to huge reduction in number of outlets that sell CDs
First came the spectacular fall of Woolworths, bringing its entertainment arm crashing down with it. Then UK retailing was struck another cruel blow when music distributor Pinnacle Entertainment succumbed to the same fate.A bleaker week for high-street record stores is hard to imagine and, as many struggle to stay in business, one thing seems clear: only the fittest will survive.
The astonishing double-whammy for an already declining industry has left it contemplating a very different future - one without small independent record shops; one where the HMVs of this world dominate; one of a diminishing CD market; one, some even whisper, without the CD itself.
With CD sales estimated as down 27 per cent this quarter compared with 2007, last week's events have pulled into sharp focus the problems of those in the 'physical' - as opposed to digital - music retailing industry. 'We could be living out the last dying days of the CD, that's the worst-case scenario,' said David Balfour, contributing editor of trade e-magazine Record of the Day.
Not everyone agrees. With Take That's new album, The Circus, predicted to become the fastest-selling of all time this weekend, having shifted 500,000 copies in six days, there appears to be viable demand. And around 90 per cent of album sales are still in physical form.
But some stores were initially unable to get their hands on the Take That album because of the collapse of Entertainment UK (EUK), the wholesale distribution arm of Woolworths, which supplied music and DVD chain Zavvi along with many other outlets.
Zavvi, which has 125 stores nationwide, has found replacement distributors. Other smaller, less well-placed stores risk being left high and dry, missing out on crucial pre-Christmas trade.
Retailers must also take into account the opening of Amazon's British MP3 store last week, selling the Take That album at £3, while Asda was charging £6. 'Those are really low prices. It sets a precedent,' argued Balfour. 'For Amazon it was a loss leader. But it sends a message to customers that that is the value of a new album. It's more downward pressure on pricing in the high street.'
The fate of EUK adds to that pressure. Its collapse forced Zavvi to suspend online sales because of stocking problems. 'But still it is tough for them. It's going to test them,' added Balfour. 'It's not unimaginable that HMV could end up being the only big chain.'
HMV, which has 250 stores nationwide, has reinvented its store format to remain relevant. 'HMV has looked to respond to the changing market in a different way to everyone else, by going back to our specialist credentials,' said a spokesman.
'We're engaging more with our customers - getting them closer to the music, films and games they love and enabling the choices they increasingly expect in a multi-channel world - whether that's for physical products, which is still how most people buy, or for digital downloads, which we now sell in MP3 format online at hmv.com.
'While music remains in our DNA, HMV has diversified heavily in recent years. After DVDs and Blu-ray, we now actually sell as many games as we do CDs, while we're also seeing increased demand for licensed artist merchandising and personal technology products, such as iPods.'
A belief that individuality will help them through sustains shops such as the fiercely independent Rough Trade, set up in London's Notting Hill in 1976, which says its new shop in Brick Lane, east London, is its 'biggest project yet'.
'The way it is laid out - we have a stage for performances and the whole ambience - it's all about having an experience,' said director Peter Donne. 'It's not just about going online and just buying music.'
Donne admitted that the collapse of Pinnacle Entertainment, one of the largest independent distributors, would certainly have an effect, causing a hiatus in some supplies. But for more vulnerable shops it could be enough to put them out of business. The beneficiaries, it seems, could be those in the digital market.
'Our phone is currently ringing off the hook,' said Denzyl Feigelson, founder of AWAL (Artists Without a Label), which distributes digitally and claims to represent 3,500 artists. 'We're getting calls from desperate labels who are now experiencing a very hard time. With the collapse of Pinnacle, and Woolies and EUK, it has created a domino effect. A lot of artists and labels will struggle.'
Retailers are admitting to very tough times, said Balfour: 'There will always be a place for niche specialists, but it is going to be really, really tough. It wouldn't surprise me if in five years' time there's vastly fewer record shops than there are today, and today there's vastly fewer than there were five years ago.
'I think the shift will be to digital, because it doesn't have physical distribution problems. I think there is definitely a demand for CDs and vinyl. People who buy digital also want the record as well, it's an ownership thing.
'The problem I foresee is that infrastructure might not be able to support that. If you've not got the shop to sell it in, and you've not got the people to distribute it, even if people want it, there might not be a viable business there. That's the worst-case scenario.'
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