Archive for July, 2016
Why HMV and the vinyl revival are just delaying inevitable and important decisions about the future of high street music retail
When HMV and FOPP went into administration in January 2013 it should have been a watershed moment. Nobody was sure what would follow but it was clear that HMV’s model was unsustainable and no amount of tweaking would put it right. What was not expected was that eventual owners Hilco would turn this fact into a powerful bargaining tool. All the Edinburgh HMVs were to close and many commented this would leave the way open for Avalanche. I did however always fear the worst. Somebody would buy the FOPPs for sure and the extent to which they would be competition would depend on the new owners. If HMV resurfaced it would probably be in a smaller, different location. Again the new owners would be key and quite possibly diferent to the owners of FOPP.
Hilco the turnaround specialists now owned the debt and ruthlessly announced the closure of shops that were making a loss which was most of them. It left the question as to whether the rump was sustainable and who would buy it. There were over 30 serious notes of interest but come the day nobody made an offer. The consequences of this were not immediately obvious but soon the picture became clearer. Hilco were approaching record companies and landlords with a simple message. HMV is fucked. Nobody wants it. Maybe we can turn it around but we can’t be paying market rents or indeed be paying for stock at all until it is sold. Shopping centres in particular panicked and offered them a year rent free to sort things out. With most high streets having empty shops only a few landlords could be sure of getting new tenants. And so the new HMV model was born. Pay as little rent as possible and take no risk on stock only paying for it once sold. Discovering supermarkets no longer paid for stolen stock Hilco demanded that too and then promptly dispensed with security !
In Ireland where there was much ill feeling about the closures including sit ins HMV would also return and soon after took over Xtra-vision where the DVD stores could also stock HMV product. It seemed a crazy move but surely Hilco had a cunning plan ? In the UK record companies and most landlords capitulated knowing that Hilco were not bluffing about closing HMV down if they didn’t get the terms they wanted. Hilco had closed down Borders after a matter of months so their reputation went before them.
So independents were put at a massive disadvantage after all the talk had been of the need for a level playing field but there was something far more important in the medium to long term. Hilco’s model of “we are completely fucked” is a strategy that can only work for so long. They have had to leave key sites in Glasgow, Cardiff, Nottingham and elsewhere as landlords could get a better rent from others. Sure they can duck and dive and find somewhere cheaper but it isn’t exactly the most positive of strategies. They can argue with Tesco and Amazon about who is selling what but there is an inevitability that as time goes on they will sell less. HMV in the UK will make a profit if for no other reason than they close a shop as soon as it starts losing money. The problem for the long term future of high street music retail is one day they will simply make a business decision to get out of the market completely. They might be able to sell but who would be mug enough to buy a failing business and without the clout of Hilco. If anybody had any doubts the recent announcement of the closure of all their shops in Ireland on the back of closing down Xtra-vision should point the way.
As for vinyl nice as it is to see a resurgence it has, as with HMV, just delayed the inevitable. For HMV making a profit thanks to Adele CDs, low rents and favourably trading terms is not sexy. Profits due to vinyl sales and in-stores, no matter how small they are in reality, are “cool”. Vinyl only shops are not the future except in only the most niche of terms. Vinyl is not a fad but it is also not here to stay at the current levels seen and it will be abandoned as and when the bandwagon jumpers see fit.
If HMV had been allowed to go to the wall in 2013 something would have taken its place. Maybe somebody buys the FOPPs and expands the chain. Maybe Rough Trade implement the expansion policy that has so far seen them go no further than open in Nottingham and take over Rise in Bristol. Maybe record companies take over some shops. Universal looked at buying FOPP previously. Labels are already opening shops. Maybe several things happen but at least it wouldn’t have been the same old, same old.
Similarly if the vinyl revival had stayed at the level of a niche indie shop thing then record companies would have been forced to look at a way forward rather than wallow in the past. In 2013 there was a far better chance of new ways and businesses getting established. There is no saying if it would have been a better world for independents, it could easily have not been. Other Music in New York recently closed despite surviving longer than most including a massive Tower Records opposite but they were still taking half of what they used to. The challenges facing music high street retail are many but one thing is for sure and that is that HMV and vinyl are not the answer and instead are just delaying the inevitable. The vinyl bubble will burst in the next year or two. Second hand vinyl shops will I’m sure continue to thrive. HMV may duck and dive for a few years yet but eventually they will come up with a face saving story as to why they are quitting. By then it may be too late for something meaningful to take its place.
When artists and labels first started selling directly to their fans it was clear to me that this would be a bad thing not just for the future of shops but for the future of new music and eventually the future of all artists except the very biggest. I suppose to some extent it was because I understood the mind and thinking of the super fan long before the phrase was even coined. There were people who you knew would buy everything by an artist and then there were those who would if they could go beyond that wanting anything related to the release of the album or single be that a poster, badge or a sticker we had in our window. One of the many ironies in all this is that for years we asked for extras to give customers and it rarely went beyond a limited number of signed copies to get fans in quickly. Eventually labels and artists would claim they had to cater for super fans themselves as shops had not done so !
The effect of downloads was still an unknown and streaming wasn’t even a consideration but as it turned out they were never going to matter because super fans live in the physical world. At this point the equation was simple. Independent shops invested time and effort into promoting mainly new artists that either they liked or they thought their customers would like. They knew in the end they would be sold out to the majors (Virgin, HMV + more!) but that was normally by the third album and they could move on to find the “next big thing” while still selling the artists they had done so much for. On the 10th anniversary of their first album Interpol were telling anybody who asked that it was UK record shops that broke them while they promoted the reissue that shops would only be given some time later. Further back in time and history records that The Pixies as with many American bands first found success in the UK and again to a large extent because of the support of independent record shops and it has to be said independent labels.
While albums obviously sold far more the amount of effort shops put into promotion should not be underestimated. The pay off came with the second album that assuming it was not a big let down which could easily happen would sell to the fan base the shop had built. As the ability to sell directly to fans online became an option the problems were clear. In many cases shops had helped labels build up data bases of fans. Now that information could be used to offer the fans of established bands a reason to buy directly. At the same time though breaking new bands was a different matter still best done by shops. While the financial incentive was to a large extent gone shops continued to do what they had always done supporting the music they loved. Whether on a label or self distributed one thing quickly became clear and that was that second album sales very rarely ever came close to the first album no mater how well the album sold and was received.
As the market shrank it made fans rather than the casual music buyer a far bigger part of the equation and when PledgeMuisc came along with I’ve no doubt the good intention of helping new bands raise money what it quickly turned into was a way for an artist to take all the super fan sales for themselves. At the same time the growth of social media and online sales meant well established bands could sell their expensive box sets and bundles directly while those indie exclusives are really not all they are made out to be.
Which brings us to today. Only the most mainstream of artists sell week after week (Adele, Ed Sheeran, Sam Smith plus a few others) while even the biggest of other artists now see their sales crammed into the first few days as the presells and initial weekend sales kick in. Decent sized bands sales have been reduced to their fans and no more and new music doesn’t stand a chance. Shops are now a different animal completely from those indie shops in the 80s and 90s and in fact there are literally only a handful left from the thousands that sold that Pixies “Surfer Rosa” album all those years ago. Those middle sized bands can often rely on publishing and sync deals and many if truth be told hang on too long and stop new bands coming through. So the biggest loser in all this is new music with the odds now heavily stacked against even the best of bands. Bigger indie labels can pretend their new bands are selling but the truth is that even with everything at their disposal they can sell low hundreds. What doesn’t help is that so often the bands supported are really not very good a genuinely interesting new band is lost among the masses.
So the music industry and shops will limp on selling old albums to old people and pretending it isn’t so. Unless something dramatic is done this will be the decade that new music died and all this year’s stats are already showing this will be the first year old music outsells the new and of course for the purpose of these figures new music includes the new Adele album ! There simply won’t be another Pixies who in turn paved the way for Radiohead and Nirvana among many others.
And if you want the new limited edition Pixies box set, t-shirt and exclusive poster bundle. That will be £81.99 on PledgeMusic !
As some of you may have seen the council approved planning permission for the King’s Stables Road site. “A 92-bedroom hotel is at the centre of the development, alongside studio flats, student accommodation and a public square” according to The Evening News. They also say “Members of local groups, including heritage watchdog the Cockburn Association and Old Town community council, gave presentations urging councillors to refuse the proposals.”
The last two sentences are telling.
The discussion was interrupted by angry outbursts from the public gallery, with a man repeatedly saying: “You need to listen to the public.”
Following around four hours of deliberation, councillors voted 11 to three in favour of the development.
There is a little more detail from the Edinburgh Reporter that the site will involve “59 residential units, a 92 bedroom boutique hotel, 167 student flats, an arts facility, and a range of commercial units.” There are also more detailed comments from those who opposed the planning but nothing from the Greater Grassmarket BID. As far as I am aware their position was that they could not support or indeed really comment until there were full details on what type of hotel and retail was envisaged. Neither of these things are essential to get planning but when I spoke to the developers at the consultations they said it would be unthinkable not to have these details in place along with an arts partner before going before the planning committee.
What is stunning about all this is that Edinburgh Council knew exactly what was needed on the site. After the piece in The Evening News about my vision for the area (given it was round the corner from our old Grassmarket shop) I was contacted by the council, the architects that had been commissioned to do a study of what was needed and various other related organisations. They all spoke with one voice. Improving footfall was essential and the continued decline of the Grassmarket footfall figures since have only confirmed that. People walking along Princes Street, up to the High Street and down Victoria Street should be encouraged to continue through the Grassmarket along King’s Stables Road and back to Princes Street in a circular motion rather than turning back and returning via the Mound. Others might care to walk through the West Port and continue that way.
With the Usher Hall and Filmhouse among other arts facilities nearby the site could become a gateway to an arts hub. Just as importantly the old developer’s trick of claiming there would be some “interesting retail” would not be acceptable. Too many units had lain empty long after hotels, flats and offices were built while arts facilities either failed to materialise or were greatly reduced. This site was about “credibility and deliverability”. Even that wasn’t good enough in that the site also had to become an “attraction” outwith its arts complex and retail. There had to be detail, hard facts and partners in place for every area of the project. A tough ask but very sensible in that it recognised just what was needed to revitalise what was a completely dead area.
All of this came from or was confirmed by Edinburgh Council at meetings on the site. I agreed to consult with interested developers introduced by the council (there was no fee I should add) and it quickly became clear only one developer took the council’s wishes seriously. The rest were quite honest in that they would be aiming to do the bare minimum to keep the council happy while getting on with their hotel and flats. Wary of what little I knew about these things I questioned would somebody not come in offering lots of money and all these noble plans be forgotten. No I was told there was a points system in place that meant just money couldn’t buy this site. When I was told it was indeed a last minute larger financial offer that had scuppered the bid I was involved with I did later ask under FOI how the decision had been arrived at but was told this was commercially sensitive information while planning was in progress. Maybe they will say something now ?
18 months later and everything the council said wouldn’t be allowed to happen has happened. The arts complex is now a small arts facility with no detail, there will be unspecified retail units and the “attraction” was forgotten long ago. Peveril the developers who won the bid did ask to meet me straight after the decision and were happy to admit their arts complex ideas consisted of a blank piece of paper saying “Arts Complex”. That I was told was how it worked. They would consult to see what was wanted.
While the rest of Edinburgh has had a small decline in footfall for a while now (still not great and worse than the rest of Scotland and the UK) the lat two months have seen footfall in the Grassmarket fall 39% each month and the months before were all substantially negative too. There had been a plan to boost footfall in the Grassmarket with a Victorian themed Christmas Festival last December. Unbelievably Christmas and New Year have become one of the quietest times of the year as everything is focused on Princes Street and St Andrew’s Square but the council voted to support residents who objected to the idea.
When it is taken into consideration that Grassmarket footfall includes those that simply reach the bottom of Victoria Street and turn back (the counter is on the Grassmarket Hotel) and those who just pass by to get to the Cowgate the actual figures will be even worse. Furthermore the Grassmarket nighttime footfall has not declined anything like the daytime footfall which must therefore be down substantially more than the average figure. Finally as even Essential Edinburgh admit in their last report retail sales are worse than footfall though food and drink sales unsurprisingly have improved even with declining footfall so you can only imagine what the non-food, daytime, retail sales must be. It is precisely because of this every empty shop in the Grassmarket now becomes a takeaway that doesn’t need hot food consent.
It didn’t have to be this way and the biggest problem is nobody is held accountable. When Avalanche moved to the Grassmarket not long after the 7.5 million pound pedestrianisation there was huge optimism for the area. Very quickly however the council withdrew support saying all their available resources were dealing with the problems caused by the tram works. All focus has since been on the Essential Edinburgh BID area which is already awash with money given the very many high profile businesses within the area while the Grassmatket and indeed the other surrounding areas have been abandoned. It wasn’t long ago the Grassmarket was being hailed as the new Covent Garden under new plans but when little materialises nobody is held to account.
Of course what is planned is better than the current derelict site but it could have been so much more. The King’s Stables Road was a massive opportunity that will not come again and that has now been lost as the council looked to a short term financial gain that will have long term damaging consequences in the future.
You can see the proposals I was involved with here.