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HMV Marketing Strategies to Survive in the Digital Word

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Abstract

Technological innovation has changed the method of operation of the music industry. Physical retailers of music are almost on the verge of extinction due to the growth of online music. HMV was one of the most potent music retailers in the 20th century. Yet, the proliferation of online music and change in the customer attitude towards the purchase of music has weakened the position of HMV. This paper has conducted secondary research on HMV to find the loopholes in the current management system and suggest ways in which HMV can improve its prospects. It has been found that lack of investment in the online music business has led to the quick fall of HMV, and there are considerable deficiencies in the management system, which have further weakened HMV’s share. An analysis of the change noted in the customers’ taste had pointed out the reason behind the decline of HMV. Consumers in the digital era have been found to engage in piracy and free download with the support of technology. Improved product differentiation and enhancing customer experience are the possible ways in which HMV can improve its prospects for the future.

HMV Marketing Strategies to Survive in the Digital Word          

Industry Context

  • Brief History

HMV Marketing Strategies to Survive in the Digital Word

Figure 1: BBC, HMV: A visual history, 2013

As the last presence of high street music store, HMV, which stands for His Master’s Voice, has a long history of 93 years. HMV is typical enough to represent the whole music entertainment industry because it is the last remaining music retailer. Their first store was born in 1921 and started to sell gramophones, radios and popular music hall recordings (BBC, 2013). The following new era of CDs (Compact Discs) turned HMV into a hugely profitable music record company successfully during the 1980s (BBC, 2013). However, around the 2000s, the invention of MP3 has reshaped the traditional pattern that consumers used to listen to music. Due to the contribution of the digital revolution, which was generated around the 2010s, HMV’s retailing experience is no longer as attractive as it was (BBC, 2013) as HMV’s annual report in 2012 (Figure) proves that the music giant has started to suffer from financial losses and sales decline.

Nevertheless, since the music retailer did not react as early enough to embrace the digital trend, HMV formally went into administration in early 2013(Montgomery, 2013). Fortunately, the music giant has been brought back with £ 50m by Hilco, the restructuring specialising in April 2013 (Batty, 2013). Later, the new HMV website, which pays more attention to content and personality while rarely e-commerce, has been re-launched by the company in October 2013 (Vizard, 2013).  

Industry Analysis

Introduction

Porter’s five forces analysis, which Michael E Porter conducted in 1979, provides a framework to examine any industry and understanding the underlying structure drives of profitability and competition. To better understand the whole music industry, porter’s five forces will be used to release the competitive environment’s evaluation. 

Porter’s Five Forces

Porter’s Five Forces

Figure 2: Theoretical model of Porter’s five forces

Bargaining Power of Supplier

The music industry’s supplier could be consists of source that music labels may have access to music. Music industry suppliers are present in diverse forms. These forms include artists, their managers, products (indirect suppliers), as well as suppliers of music accessories, disks and other raw materials for packaging. The negotiating power of these suppliers is strong. The Internet has provided these suppliers, especially the artists, with multiple opportunities for strengthening market position (Paridon, 2004). They are presently no more dependent on record labels and can perform similar tasks at their homes. Also, the distribution of their recorded products is also feasible through the Internet. With the availability of social media, artists have gained the chance to promote themselves and sell albums as well as build fans loyalty to become widely famous. Video sharing services such as YouTube have also helped several artists to share as well as promote their talent across the globe. At the same time, the presence of a large population of suppliers has its bargaining control over fabrics for processing and recording discs (Watson and Spence, 2007).

However, compared to the various resources that record label could provide, like strong network, expertise and the ability to access to massive distribution channels, the resources what artists could reach the turn to be insufficient. From this point of view, it is necessary for record labels to enhance their strengths so as to convince artists and new talent to sign a contract with them. On the one hand, part of artists usually becomes well known first through the Internet and subsequently join in record labels enjoy their strengths. This could be clarified with Justin Bieber, who started from YouTube and built a fan base and was widely praised by several music media and subsequently join the record label Def Jam (Suddath, 2010). On the other hand, there are a number of stars that have a contract with record labels for a few years and then release themselves from the company. For example, Madonna left Warner Bros for Live Nation Inc. that is the “largest live entertainment company” (Livenation Entertainment, 2014), in order to go into business with musical acts instead of being signed to an actual record label (Billboard, 2007). This trend illustrates that those artists and its organization could gain more of the resources that were held by their previous record label. In the sight of a record label, keeping attractive enough for an artist to stay or sign a contract with them becomes more and more difficult.  

Bargaining Power of Customer

Customers who buy music in stores already have a lot of negotiating leverage. In the UK music industry, there are two types of customers: corporate and private.With the evolution of download services and legal streaming, e-shops and streaming services, such as iTunes, have become popular among consumers. People are reportedly purchasing less records as a consequence of the increase in illicit downloading (Wikstro, 2005). Offline and internet stores that buy albums in bulk from music labels are corporate customers in this sector. Stores like Game and HMV, as well as web stores like AmazonMP3, iTunes, and Zune, are among these companies. Corporate customers’ purchasing leverage has been weakened by strict contracts and an increase in the number of sources where users can illegally stream songs and images (Rust, Kannan and Peng, 2002).

Threat of New Entrants

Established and branded music companies are investing millions in test promotion, filming, and image-development programmes in order to guarantee the artist’s competency and authenticity before releasing them to the public. These fields necessitate the application of specialised expertise as well as extensive financial resources. Furthermore, these campaigns are backed up by a comprehensive delivery network and a large number of internet distributing partners (Michel, 2006). This online collaborators are often useful for distributing albums to specific locations quickly. Furthermore, larger labels may conveniently utilise their business connections to organise concerts, album promotion shows, or create buzz for various musicians. Since younger companies do not have access to these services, initial risks and capital investments are greater than for existing brands.

Then again, owing to the easy accessibility of the smaller studios, more number of independent and newly established record labels is readily launching their music videos and songs. Also, artists presently have the facility to record at home, and thus, the threat of new entrants is rising (Leftly, 2013). However, given the high brand value of the big brands owing to experience in the market and huge reputation, it can be said that the threat of new entrants will take a long time to materialize before impacting on brand popularity, equity or profits of the bigger brands.

Competitive Rivalry

The competitive rivalry has increased over the past few years in the music industry. Achieving product differentiation therein is quite difficult as all genres are represented by common artists. Then again, the competitors were able to generate differentiation by way of selling different music formats such as DVD, CD and Blue-Ray, as well as online formats including WMV and MP3. Nonetheless, with the advent of digital downloads and consumers finding it easier to download music rather than visiting the music stores, the average number of music outlets have reduced, and most rivals are focusing on developing online tactics and strategies so as to capture the market (Design Week, 2013). Both the artists’ and consumers’ power is rising, and as a direct result of the changing business model of this industry, it is imperative that the recording business should expand into a broader catalogue range for sustaining income and business operations (British Broadcasting Corporation, 2013). Hence, it can be said that although competitive rivalry is high in the music industry, the overall power and profit margin of the competitors is diminishing. 

Threat of Substitutes

The threat of substitutes is high in this industry. Websites offering pirated music for free are clearly the biggest substitute identified. While the final choice in respect of whether to purchase the music or download the same illegally is totally dependent on consumer’s conscience, the free music attribute of pirated websites is already taking away huge profits and revenues (Koh, Murthi and Raghunathan, 2010). Another substitute for the music industry is a free music streaming websites such as Myspace. Although the consumer is not able to download the tracks for free, the websites allow listening to any track an unlimited number of times without purchasing the same. Thus, the live streaming websites are another viable and identified substitute as they adequately entertain consumers (Huang, 2005).

Also, other industry factors, such as radio channels, 24-hour music channels and other television channels, can be considered as indirect substitutes related to the music industry. The average price of these entertainment channels is high as such services require set-top boxes, monthly subscriptions as well as maintenance charges. At the same time, owing to the added facilities provided by these services, such as huge choices of channels and added recording facilities, the overall value of these services are set higher compared to that of the average music albums. As a result, music albums are increasingly being replaced by television and music channels and radio channels (Banda, 2013). 

Music substitutes are also present in the form of entertainment channels such as games and films. Although these are not direct substitutes, they are entertainment providers with similar goals and objectives, which are gaining consumer’s time-share as well as that of their wallet (Zentner, 2006). Moreover, the utility of these games and movies is larger compared to that of music. It can be said that the ratio of cost to performance pertaining to games and movies is greater compared to that of normal music. As a result, even though the products of the gaming industry and films are high priced, yet they appear to fare better in terms of revenues and profits. 

Thus, Porter’s five forces for HMV and its competitors can also be described in a matrix form as follows;

  • The Threat of Substitutes (High)

    • Websites are offering pirated music for free, snatching market share from HMV.
    • Free music streaming sites such as Myspace creating competition for HMV
    • Radio channels, 24-hour music channels and other television channels are also potential threats as they take away consumer’s share of time, resulting in an overall decrease in HMV’s revenue.
    • Entertainment channels such as games and films are also viable substitutes for HMV.
  • Supplier’s Bargaining power (Medium)
    • The Internet has provided these suppliers, especially the artists, with multiple opportunities for strengthening market position
    • Keeping the record labels attractive enough for an artist to stay or sign a contract with them is becoming more difficult for HMV.
  • Buyer’s Bargaining power (High)
    • iTunes has become popular among consumers reducing the number of consumers opting for CDs and VCDs from HMV.
    • Stringent contracts, along with increasing sources where consumers can download songs and videos illegally, have lowered the bargaining power of HMV.
  • The Threat of New Entrants (Medium)
    • Initial risks, as well as capital expenditures, are higher compared to that of the established brands
    • Owing to the easy accessibility of the smaller studios, more number of independent and newly established record labels are readily launching their music videos and songs.
    • This has increased the threat of entrants for HMV.
  • Competitive Rivalry (High)
    • Familiar artists represent all music genres, thereby minimizing differentiation for HMV.
    • Consumers are downloading music rather than visiting the music stores of HMV.
    • The average number of music outlets of HMV have reduced
    • Artists’ and consumers’ power is rising, and HMV is looking for newer avenues such as digital for survival and growth

Management Issue

The digital revolution in the music industry formally started in 2001 due to the first iPod’s release from Apple (BBC, 2013). With the significant influence of the Internet, not only consumers begin to rethink and refine their purchasing behaviour, but also the business start to redesign their strategy to survive (Amy and Marty, 2000). As a result of not reacting early enough, the business model of HMV is no longer relevant and sustainable. 

The faddish and useful website that makes online sales possible has not been launched by HMV so far. The new website, which HMV overhauled in 2013, concerns the content and personality and seldom on e-commerce. Although the service of digital music download has been offered, consumers still unable to purchase the products they might find in the store (Vizard, 2013), for instance, CDs, DVDs and computer games. To some extent, this channel makes it possible for HMV to build a loyal community and bring customers to its retail store.  

To embrace the digital trend, the mobile app service, which enables both users of Andriod and iOS system to scan albums covers and pre-listening 30 seconds music of any track, has been released by HMV (Vizard, 2013). Nonetheless, the user could download music by tracking back to the HMV website instead of using the mobile phone directly. As a result, valuable customer experience is quickly being irrelevant to HMV. 

As a result of getting involved in the digital revolution too late, HMV has struggled to compete with other diverse competitors like Amazon, iTunes, Spotify and Tesco, which have successfully acquired the new market of young consumers by offering various products services to satisfy their specific needs. By providing a relatively lower price, Amazon and Tesco are almost undercut the sales of HMV’s CDs and DVDs (The Guardian, 2013). Not only iTunes has provided a vast number of digital music downloads, but also other entertainment like movies, TV shows, apps, and books (Apple, 2014). The service Spotify offered can be distributed as a free tier and premium subscription tier, which is only $9.9 per month (Spotify, 2014). Spotify could gain more royalties from the consumer, but artists could generate more revenue in that way. Those competitors have developed themselves in different ways to capture customer’s imagination overtaking HMV.  

In general, the nature management issue for HMV could be divided into customer experience and a limited product range. As the last one getting involved in digitalization, HMV has lost the way to get in touch with customers’ need for a long time. The website and mobile app are not good enough to keep customer stay with them. As a feature of the high street, HMV has been beset by the intense competition environment and cheaper CDs and a digital download.

Literature Review

Online Sales

With the Internet’s evolution, consumers have found a new platform that can provide an unusual and comparatively more efficient shopping experience. In the present scenario, customers are independent of specific locations or opening hours of the shops. They can browse and purchase the service or products offered at any time and from any place. In terms of e-commerce services, consumer research has increased over the past decade with increasing online shopping among consumers (Green, 2001). Consumers’ behaviour about online shopping can be directly related to five elements: logistics support, e-stores, the website’s technological characteristics, and presentation of the home page as information on the website and product characteristics. Studies have also indicated that people with time constraints are more involved in online shopping (Johnson, 1999). The music industry’s business has declined, especially that of the traditional company comprising CDs and DVDs. The products such as books, magazines, video games and music merchandises are extensively sold in online format (Wu, Cheng and Yen, 2008). 

Customer Buying Behavior Toward Online Sales

Customer buying behaviour theory can be explained through the Nicosia model. According to this model, the consumer undergoes five stages before finally purchasing services or goods. This first stage is problem awareness and needs recognition, wherein a consumer identifies a need. The second stage is information search, where the consumer searches for information related to the products with similar offerings. The third stage is an alternative evaluation, where the consumer selects the best-fitted product or service brand according to his or her needs and requirements. The next stage is a purchase, where the final purchase of the service or goods takes place. The last step is an evaluation after the purchase, wherein the consumer evaluates the product or assistance concerning the investment made. 

Customer buying behaviour

Figure 1 Customer buying behaviour (Source: Day and Barksdale, 1994)

The consumer mindset towards online services and products can be related to their information processing. For instance, consumers shopping online are goal-oriented compared to offline shoppers who are experimental. As such, the online stores offering discounts and sales will attract goal-oriented consumers compared to experimental ones. Such online shopping behaviour of the consumers is generally formed through various sources such as personal experience, direct marketing, social network, the internet, and mass-market exposure (Schiffman and Kanuk, 2000).

Customer Satisfaction

Contemporary online consumers have huge expectations from marketers, such as instant gratification. Whether it is an online transaction or download of music videos, consumers want every service to be prompt, hassle-free and cheap (Koh, Murthi and Raghunathan, 2010). In this situation, consumer satisfaction has become increasingly difficult to attain, and with declining consumers’ loyalty, marketers are striving to maintain the same through traditional strategies and marketing gimmicks. Additionally, with increasing similarities between personal and business transactions, consumers expect their service providers to be available. Considering the increasing mobility of online consumers, marketers need to devise tactics that will facilitate communication with the consumer as per their suitability and ease, thereby enhancing customer satisfaction (Bockstedt, Kauffman and Riggins, 2006). 

Communicating with firms via multiple and unique SMS channels, webchat, and email chains is becoming greatly popular among online consumers. How a firm can respond to these customer requests will ensure effective connectivity and greater satisfaction among the consumers (Gaffney, 2007). Apart from that, companies can also utilize the opportunity of capturing new customers. Providing better customer service by way of implementing promotional tactics and relationship building will retain the existing customers and contribute to the generation of new business (Gaffney, 2007). 

Advantage of Online Sales

Multiple online communities have started to dominate the online sales market. Various social media services such as MySpace, Facebook, LinkedIn and Habbo Hotel; content sharing sites such as Vimeo, YouTube, Slideshare and Flickr; and gaming sites such as Eve Online and Sims, have opened doors for social media marketers in terms of advertising and promoting their services and products, product development, establishing positive branding effects as well as gaining immense media popularity, thereby increasing the brand equity (Thompson and Sinha, 2008).

Online sales have provided marketers and consumers with various advantages alike. Firstly, marketers need not spend a considerable amount of capital on real estate for establishing stores or buying/renting locations. Secondly, the number of products and variety is more in online stores than that of the traditional brick-and-mortar formats, which are constrained by limited space. Online sales are increasingly becoming popular among consumer, too (Penz and Hogg, 2011). For goal-oriented customers, especially those with particular needs and less time to spare, online stores provide a perfect platform where they can locate appropriate products and services with the required specifications. Also, most online and offline products are similar in terms of features and offerings, so consumers need not spend extra time and money on travel and purchase. Increasing online sales can also be advantageous, increasing the duration of sales (Eroglu, Machleit and Davis, 2003). Consumers can browse and purchase online rounds the clock, unlike in traditional stores with fixed opening and closing time (Verdict Research, 2013). Products can be displayed at any corner of the globe, facilitating higher sales and revenue. While smaller street or retail stores cannot compete with the bigger ones, they can achieve a competitive advantage by entering the online format. 

  • Product Service Range
    • Differentiation

Even though HMV is posited on flimsy grounds, the company can establish itself in the volatile music industry by adopting the new trends and offering services and products that can satisfy contemporary customers’ demands. HMV can be differentiated from its competitors on flexibility, partnerships and a diversified portfolio of products. HMV is one of the oldest brands in the music industry, which provides the firm with a unique brand image (Wu, Cheng and Yen, 2008). Additionally, the company has undergone a series of essential partnerships with MAMA Group, Curzon Cinema, and 7 Digital firms. These partnerships have given HMV a unique set of customers through which it has been able to remain afloat in the market. Lastly, the diversified portfolio of HMV ensures that the business is never suffering losses. The company has forayed into visual, digital music, fashion and technology, making it a one-stop-shop for the target customers. Established brand image and constant expansion into new and popular product and service segments are the two major differentiating HMV factors (Eroglu, Machleit and Davis, 2003).

    • Competitive Analysis

At present, the top competitors of HMV include Amazon, Apple, Arena Media and Tesco PLC. However, HMV’s significant competitors are Amazon and Apple, which have successfully captured the new market of young consumers by offering products and services as per the specific needs of consumers (Hoovers, 2013). Although the company has performed well in terms of brand value and brand image, its average profits and revenue have slumped over the years. Such a situation can be attributed to the changing trends among consumers and the increasing popularity of digital services and products (Savov, 2013).  

Figure  Market share of Music and Associated products of HMV

Market share of Music and Associated products of HMV

(Source: Thompson and Sinha, 2008)

Amazon has captured almost 20.3 per cent share of the current entertainment industry, and iTunes have acquired around 9.1 per cent of the market. Simultaneously, HMV’s market share has declined to 16.1 per cent (Design Week, 2013). Even though HMV was established comparatively earlier in terms of expanding into the online market, the full-fledged transaction was not completed until 1999, thereby leading to immense dissatisfaction among the consumers and customer loss. Additionally, the download service of HMV was launched very late in 2010, and consequently, HMV failed to capture the free music market (Design Week, 2013). 

  • Customer Experience 
    • Improving Artist’s Experience

The music industry can function because of two critical participants; the artists and consumers. The artists are individuals who rent their voice for entertaining the other group of enthusiasts called the consumers. Marketers spend a considerable amount of budget for ensuring customer satisfaction through promotions, campaigns, discounts and freebies (Jones, 2013). Also, the overall benefit solely from music consumption is minimal. Also, HMV can create unique service, especially for its artists and contributors, such as launching official websites of the artists, campaigning for them, organising tours comprising live concerts and other performances as well as promoting tour campaigns of artists, distributing concert tickets to music enthusiasts on behalf of the artists as well as providing free consultancy and geographical statistics such as, music download, concern traffic, popularity or likes in social media to the artists (Bockstedt, Kauffman and Riggins, 2006). 

    • Improving Customer Experience

Another major factor that has brought about a decline in the brand popularity and financial health of HMV is its inability to understand customer demands and trends and provide unique customers’ experience. A unique strategy to increase HMV’s customer experience is that of introducing an eCRM approach in business. This electronic CRM process is harnessing the vast data from the company’s loyalty cards, which can be further utilised to create offerings for specific customer sets. E-CRM will also help alert the stores regarding live feedback from the customers and management of the call-back requests (Gaffney, 2007). Such facilities will empower staff in taking ownership of the shop as well as enhancing customer experience and offer invaluable regional, national and local store rankings and satisfaction analysis, thereby leading to an improved in-store experience in both innovative and live manner and providing a unique strategic differentiation to HMV (Eroglu, Machleit and Davis, 2003). Through the launch of this facility, HMV will be able to establish a two-way dialogue between the headquarters, the company stores, and the valuable and loyal customers, which will enhance customer loyalty by effectively responding to their opinions. HMV can also collect customer feedback through surveys and email immediately after a customer visits the store. Such an initiative will allow the company to facilitate rapid improvements accordingly. 

    • Enhancing Digital Experience 

With Apple iTunes’ introduction, the entertainment world has become digitalised, and HMV has been struggling ever since. Also, the company is encountering steep competition from Amazon (Marketing Week, 2014). Although HMV experiences adequate web traffic, the number of such visits, which have converted into sales, has declined substantially. The company has been focusing on establishing its digital business for the last few months. To increase its digital space and attract more customers, HMV will enhance the overall digital experience provided (Gaffney, 2007). 

HMV’s digital experience, such as survey, email, response and portal, should be intuitive and clean. An appropriate and user-friendly portal will allow employees to resolve and manage call-backs and filter information based on dates so that key performance indicators of HMV’s various divisions and regions can be compared (Goode, 2014). Such outcomes will ensure healthy competition between stores and facilitate an overall increase in performance among the staff and managers. Customers will also be encouraged to share their feedback and experiences over the social media websites, which will generate store traffic, enhance attention towards the brand and increase store recommendations (Gaffney, 2007).  

    • Enhancing Brand Experience

The music retail industry has transformed into a digital business, and HMV will have to respond to this change in a prompt manner to not lose out on consumer’s mind share and pocket share. The brand is known for instilling innovation as well as facilitating greater collaboration between the artists and retailers. HMV can revitalise the brand image by strengthening its relationship with the existing customers and formulate appropriate campaigns to target new-age customers and music lovers (Bockstedt, Kauffman and Riggins, 2006). To do so, HMV will have to cut down its irregular product portfolios, close down loss-making stores and concentrate on services and products that mostly attract the present target group (Eroglu, Machleit and Davis, 2003). These include a cool place to relax and listen to music, equipped with the latest technology and offering discount and promotional sale offers to the members and regular visitors. Thus, by enhancing the brand’s overall appearance and promoting two-way brand communication with the consumers, artists, and other stakeholders, HMV will be able to regain its lost market share and successfully establish itself in the digital market. Also, HMV can enhance the overall customer experience by associating music with other consumer goods and merchandisers such as headphones, posters, t-shirts, speakers and other associated music products (Wikstro, 2005). 

Research Questions

  • What is the development trend of the music industry over the past few years until now?
  • What are HMV’s reactions in each development session of the music industry? 
  • What had happened to the users’ technology and consumer buying habit?
  • How has the perceived value of HMV changed over the years, and how the company has responded to keep its sales and revenues growing?

Research Design/ Methodology

Objectives

 This research aims to find ways in which the music industry has become digitised in the previous decades and explore the subsequent changes in consumers’ music purchase trend. This study will enable the researcher to answer the primary research question, highlighting the ways that HMV should adopt to survive in the digital music industry. The objectives of the research can be stated in the following manner.

  •  To analyse the trend prevalent in the music industry in recent years.
  • To analyse the change in the purchasing pattern of consumers in respect of music.
  • To explore the marketing strategy of HMV 
  • To find how HMV have reacted to the changes.
  • To understand the perceived value of HMV by the target customers. 

Framework

Two types of research philosophy can be applied while conducting research, namely positivism and interpretivism. An interpretivism is an approach that is more suitable when the researcher has to deal with psychological or social issues. On the other hand, the positivist approach focuses on business-level strategies and analyses research variables by estimating the relationship between them (Zikmund et al., 2012). The current research uses positivism as the chosen approach because of HMV’s problems, and the growth of the music industry, in general, requires an analysis of the business-level strategy. To follow the positivist stance, the researcher has adhered to the qualitative method. The rationale for not using a quantitative research method is that it is only useful in explaining the cause and effect relationship between research variables. However, quantitative research does not help in defining a specific phenomenon in details. Qualitative research, on the contrary, is useful in explaining the factors behind the cognitive orientation of subjects (Saunders, Lewis and Thornhil, 2012). The research problem in this paper requires a detailed analysis of the issues of HMV in the face of the high growth of the digital music industry. 

There are various ways to undertake qualitative research, namely content analysis, semi-structured interviews, simulation and games, etc. All of these are non-numeric methods and helps in-detailed analysis of problems. Researchers have identified four ways to conduct qualitative research: ethnography, grounded theory, case study, and phenomenology. Given that ethnography, grounded theory and phenomenology have a human or cultural aspect associated; they are not deemed fit for this research (Flick, 2014). Hence, a case study is a suitable approach because researchers can compare cases in a non-numeric manner and validate them. The appropriate method of conducting the case study is to collect historical data by using secondary data sources. Researchers can use primary data to obtain relevant information directly about the research question. According to the study made by Kuada (2012), there are three main ways to utilise a case study concerning the research:

An instrumental case study, which involves making broad generalisations from studying a particular case. Called an intrinsic case study wherein the case’s internal problems are thoroughly reviewed by applying descriptive methods. The collective case study, where multiple patients are studied, and the findings are compared to reach robust conclusions. 

Data Collection

There are mainly two types of data, namely primary data and secondary data. Preliminary data can be described as one that is collected directly by the researcher to answer the research question. Secondary data is any type of data that the researcher does not now collect. In other words, secondary information is any data that has been collected by different scholars for some diverse purpose that may or may not have any direct link to the research subject. According to the findings of Sparkes and Smith (2013), secondary data can be incorporated effectively to perform qualitative research. To conduct the current research, the researcher plans to use both primary and secondary data. This research is related to the study of the music industry and the change in consumers’ purchasing pattern. Also, the marketing strategy adopted by HMV will be studied in details. To collect the relevant data primarily, a considerable amount of money and time is required on the researcher’s part. The researcher would have to meet the top management level employees of HMV to get a transparent picture regarding its business-level strategies undertaken when the market trend was changing. However, this approach is not feasible because the management level employees of HMV would not entertain the researcher and cooperate in data collection. As a result, the researcher has to collect primary data from different sources. The researcher has planned to use blog analysis for the same.

To complete the data collection process, the researcher has to use secondary data inevitably. For compiling data about the customers’ purchasing behaviour, market trend and marketing strategies of HMV, secondary data will be collected from websites, business reports, journal articles, online data, reports published by HMV, newspaper articles and any other source relevant information. The researcher has relied on secondary data for several reasons (Taylor, Strutton and Thompson, 2012).

Firstly, the collection of secondary data is an easy way to access vast knowledge. These data have already been processed by other researchers and have been cleaned for use in research. Secondly, secondary data can provide answers to the research questions by aligning its focus on the primary data, thereby helping to draw appropriate and robust conclusions. Thirdly, secondary data can be used for conducting comparative analysis by incorporating contextual, longitudinal and cross-sectional grounds in a relatively short period. It entails cost savings. Due to these benefits, the researcher has mostly used secondary data to conduct the research.   

Findings and Discussion

Introduction

This section attempts to answer the three broad research questions set stated at the beginning of the paper. 1- What is the development trend of the music industry over the past few years until now? 2- What are HMV’s reactions in each development session of the music industry? And 3-What had happened to the users’ technology and consumer buying habit?

Research Question 1: Development of the Music Industry

  • History

The history of the music industry has undergone several changes in the last century. The earliest recorded music could be traced to the phonautograph’s invention in 1857, but this device could not replay sound. Edison invented a modified version of this device in 1887 that enabled its reuse. The year 1887 could be marked as the beginning of the music industry’s commercialisation with the invention of the Gramophone. Vinyl Records were played in Gramophones, and mass production of music had started. The year 1925 had witnessed the oblivion of cylinders and domination of vinyl records. Since 1926, the system of electronic recording was introduced, supported by the invention of OrthophnicVictrola. The period of the 1930s began to be increased by magnetic tapes. The next notable development occurred in the early 1960s when Phillips had invented the music cassette. The increasing market dominance of cassettes had led to the downfall of vinyl records. The 80s and 90s had witnessed a massive change in the music industry with the advent of compact disc (CD) players (Vaccaro and Cohn, 2004). The joint venture between Sony and Phillips had created CDs, which became the music industry’s standard format. The advancement of technology had also developed a product called CD-Recordable, which had allowed consumers to pirate music without compromising on sound quality. The rise of computer throughout the ’80s had made CD’s a viral medium among consumers. In the late ’90s music industry had witnessed MP3 players. The early 2000 saw the rise of the MP3 players and catapulted Apple as a significant name in the music market (Leyshon, 2014). The rise of the internet, computers and MP3 players had a combined effect on traditional music sales. Peer-to-Peer sharing and that of music on web-based platforms had changed the music industry’s face (Patokos, 2008).        

An analysis of the music industry over the last two decades have shown that the rise in online music sales has majorly been the factor that had brought about the decline of HMV. The last ten years have been fundamental in changing the music industry’s conditions (Banda, 2013). Since 2006, the decline in physical music sales has been estimated to be 8% annually. The UK high street music has encountered its shares of challenges, such as the decline in demand and sales favouring online download and free live streaming (Bhattacharjee et al., 2007). Over the last five years, there has been a significant fall in the consumers’ expenditure related to offline music, and video spending and the decline in the estimated value is £2.7bn (Bockstedt, Kauffman and Riggins, 2006). This could be directly attributed to the rise in free online streaming and downloads made from the internet. 

Trend in music industry

Figure 2: Trend in music industry (Source: Savage, 2013)

A significant factor behind this change could be understood from that in the customers’ perception towards the music industry. The rise in music streaming services has provided ample opportunities for music lovers to access their favourite tracks online (Peitz and Waelbroeck, 2004). Customers no longer need to spend vast amounts of money to purchase cassettes and CDs. As opposed to that, they can easily download music by way of streaming from Beats Music, Spotify, Pandora and Internet radio. The infiltration of advanced technologies like, Radio, Google Play Music and Songza, has presently made it possible to download new songs at negligible costs (British Broadcasting Corporation, 2013).   

Research Question 2: HMV’s Reactions in Each Development Session of the Music Industry

HMV’s presence and strong growth over the last century until the early 2000s could be attributed to the changes. HMV was indeed the most powerful name in the retail music industry during the 20th century. The first HMV shop was opened in 1921 by The Gramophone Company and began to capitalize on the sales of the vinyl record and other accessories like radios and gramophones. HMV had later provided magnetic tapes and cassettes as a part of their ever-growing merchandise. The company had begun to expand its stores and form a retail network. HMV stores had mainly sold 45rpms, 75 RPMs as well as LPs. The company’s major expansion began during the 70s, when more than 35 stores had opened all over the U.K. EMI, earlier known as The Gramophone Company, had used HMV to capitalize on the sales of music records by signing deals with leading musicians such as Beatles. In the 80s, the company’s management underwent a change when Thorn Electrical Industries acquired EMI. HMV came to be known as HMV Music Retailing. The flagship store was opened in 1986. 

Heavy commercialization of the music industry was initiated mainly in the late 60s and the early 70s. Popular culture strengthened the growth of HMV in the 80s and 90s. The invention of CDs had fuelled the exponential growth of HMV in the late 80s. The sale of DVDs and VCRs supported this growth. It was the period of the 90s that had managed to posit HMV as the top player in the industry. In 1995, HMV had shifted its focus from being merely a music retailer to a major recording company by releasing CDs. HMV did not stay confined to the music industry and had expanded into book retailing. The book business was kept separated from the music venture. Due to the internet and computers’ influence in the late 90s, HMV launched its first online store in 1999. This initiative provided the company with its first e-commerce site. The traditional music distribution model followed until the 90s had facilitated safe growth for HMV (HMV Group, 2004). 

The period 90s had also witnessed the fast growth of music piracy as a significant threat to the music industry. The incidents of online piracy had significantly impacted music sales. Since 2006, there has been a 20% rise in online piracy events (Oberholzer-Gee and Strumpf, 2009). In 2010, 25% of online piracy could be attributed to peer-to-peer file sharing. In a report published by one of the leading market research groups, it has been revealed that between 2005 and 2008, the total value of sales in the music industry had declined from £1.9 billion to £1.3 billion (Liebowitz, 2008). Reports published by IFPI (2012) had indicated that illegal online sharing of music had caused the loss of nearly £200 million in 2009. HMV was primarily a physical music retailer, but music recording was later incorporated into the business portfolio. Consequently, online piracy had hugely reduced the sales of HMV in the 2000s. Empirical research conducted by researchers such as Bounie, Bourreau and Waelbroeck (2006) and Smith and Telang (2010) had shown that free availability of music in a readily downloadable format was the main reason behind the incidents of online piracy in contemporary times. 

To combat the deteriorating situation, HMV, like other music retailers, had tried to take the help of Intellectual Property Rights in the U.K. and other countries where it operates.       

Changing Marketing Strategies of HMV in the Digital World

The fall of HMV could be significantly attributed to an erroneous marketing strategy followed or its lack thereof. Throughout the 90s, HMV’s biggest mistake was ignoring the meaningful investment in the online offering. The problem for HMV surfaced in 2005 when it had begun to experience a fall in sales due to the rise of online music demand, competition from general supermarket stores and free downloads (Savov, 2013). To rectify the fall in initial sales, HMV acquired a new marketing strategy by introducing price cuts and expanding the range of products in its online offering. These strategies were partially successful in revamping the company sales in 2006. HMV realised that to regain the market position, the brand image had to be updated. The company post-2007 adopted several strategies. Since 2005, the company had adopted a transformational approach by launching a download service in a joint effort with Live Nation (Leftly, 2013). At the same time, companies such as Amazon and Spotify were acquiring outstanding market share by selling physical products. The strategy was good on paper, but ineffective failure implementation had led to inadequate effectiveness of the policies. To salvage its market position, the company had introduced suspended shares and administrators in 2013 to arrest falling sales (Verdict Research, 2013). 

To improve the company sales, the management had focused on technology-based products like headphones, MP3 players and speakers doc. These products provided a massive boost to its sales in recent years. Additionally, the company has also taken steps to improve the relationship with the audio and visual suppliers by issuing them grants of warrants in exchange for ordinary shares (Zentner, 2006). The company expects to improve the supply of stocks and develop customer propositions. Furthermore, HMV is developing new strategies to capitalize upon the rise of the gaming industry. HMV is on a mission to enhance its online offering, which is why it had signed a partnership with 7digital. The partnership will allow the company to increase its online customers’ base by offering downloadable contents. 7digital, on the other hand, is signing partnerships with Acer, Samsung, Toshiba and Blackberry that will allow HMV to reap benefits. Recently, the company has launched a mobile app through which users can buy online music.  

Blog Analysis

The problems of HMV can be related to how the music industry has evolved. Initially, the music retailers, including HMV, had to concentrate only on physical units’ distribution. In the present scenario, they have to focus on the customers’ consumption era, where new customers are exposed to digital experiences. The failure of HMV could be attributed to multiple factors such as a fall in the sales of CDs and piracy. The rise of online retailers like Apple had also contributed considerably to the decline of HMV. HMV’s fatal error was not the lack of awareness about the rise of Amazon or Apple, but the ineffective failure implementation of corporate policies. HMV started to respond to the increase in online music sales at a later stage, which had acted to its disadvantage (Kelly, 2013). 

HMV had decided to remain attached to the high streets, even when the rents were escalating and customer footfall was consistently falling. Though HMV could preserve brand heritage by its presence in the high street and create interactive dealings with the customers, the sales figures were dismal. Customers had often been found to visit the stores for long periods without purchasing any product (Montgomery, 2013). The recent development of HMV’s strategy, which is to enter into administrator, can be treated as the final nail in its coffin. The challenge for HMV rose mainly in the form of arresting the declining business of its physical stores and investing in online technology.

Research Question 3: What Had Happened to the Users’ Technology and Consumer Buying Habit?

This section of the research tends to analyze the change in the customers’ perception of purchasing music. The rise of the internet can be cited as the biggest reason that had changed consumers’ outlook towards the purchase of music and other forms of audiovisual entertainment. The rise of the internet has allowed consumersmost significant to a wide range of digital content, eliminating the need to buy physical products related to the music industry. Online music portals and websites have replaced the need for printed media that once promoted music (Cammaerts and Anstead, 2012). Consumers have become interactive and are not restricted to merely reading articles on music albums. They are somewhat able to post their opinions about artists and albums. Users can retain the quality of the music like that in the original CDs. Technological advancement has lowered the cost about music purchase on the part of the consumers, thereby placing producers in a vulnerable position. It has to be understood that downloading music per se is not illegal. Nonetheless, online downloads have reduced the power of music companies and that of the artists. After the music transfers hands from owners to purchasers in MP3 or flash drive, the artist no longer receives profit from its sales (Stafford, 2010). 

Illegal file sharing is a typical music trend that has become dominant among consumers. A report published by IFPI (2012) had shown that 40 billion music files were shared on an illegal basis over the internet. Experts in the music industry have pointed out that sampling in the future and consumers will have the ultimate power to determine an artist’s survival. In empirical research conducted by Music Business Journal, it was revealed that the music industry has become saturated with media content and individuals are more interested in popular music rather than online music. Consumers have become quite restless in the era of advanced technology and desire to download particular album tracks instantly. Companies like Apple have introduced different pricing strategies to make maximum benefits from the new trend. Companies such as Lala and Spotify have managed to upkeep profits by allowing people to purchase streaming music at a price as low as ten cents. Spotify collects its revenue from radio-like advertisements, digital advertisements and subscription service. Consumers relate to these technological aspects, and Spotify reaps financial growth benefits (Stoltz, 2009).      

SWOT Analysis

HMV Marketing Strategies to Survive in the Digital WordLimitations

There are few limitations of using secondary data, such as the age of data and data quality. The researcher has made genuine efforts not to manipulate the data collected. Data that has been included in the current study has been cited by following the proper referencing technique. No offensive terms have been used in the research that can hurt the sentiment of the readers. Despite the best effort on the researcher’s part, there are certain limitations of the study that deserve special mention. The significant rules associated are stated below. 

Firstly, the researcher set multiple research objectives at the initiation, which renders the research findings ambiguous to a certain extent. 

Secondly, if the researcher had used an econometric approach by statistical validation of data, the outcomes would have improved. The music industry’s macro data could be interpreted more accurately by way of including a numeric analysis. The research has solely focused on a qualitative approach to answer the research question. Thirdly, the research problems have not been validated by referring to current research works of other scholars. To remove these limitations, future researchers can choose to explore this subject matter further. Further researches can contribute towards overcoming the problem and providing new insights. 

Conclusion and Insights

The music industry has gone through fundamental changes in the past five decades. The framework of Porter’s five forces has been used in this study to understand the dynamics of the music industry. It has been found that the bargaining power of the suppliers is high. The onset of disruptive technology and the proliferation of the internet have made the buyers’ bargaining power very high. Technological innovation has made the entry of new firms very easy. Competitive rivalry and the threat of substitutes are also high in this industry. The new millennium has brought considerable changes to the music industry with the rise of free live streaming, internet downloads and a reduction in the importance of physical CD’s. One, in retailing of us physical CDs’ important action by providing them gratification. The company’s growth had suddenly come to a halt in 2008 with a change in the suddenly cameras behaviour concerning music. The single biggest mistake of HMV was that of neglecting the potential of online music growth. It did not invest adequately to build its online platform, and other companies like Apple and Spotify was able to capture HMV’s market share. So two major problems can be identified in the case of HMV, the first is inadequate online business growth, and the second is management issues related to the limited product range and customer experience. And my recommendations to these issues are as below:

We are improving HMV’s current online sales by boosting the online business. Create a differentiated product service for both consumers and artists. Segmentation of markets creates the potential for more robust business growth. Following this proposition would improve both customer’s and artist’s experience with HMV. 

HMV had been a leading name in the global music industry in the 20th century. The company was a major retail music distributor that had experienced a meteoric rise until 2003.HMV’s growth until the early 90s could be attributed to the rapid changes incorporated, such as selling cassettes and CDs to adapt to technological changes. The situation had changed with the onset of the Internet, MP3 players and online streaming in recent times. They can simply download favourite albums without paying for the same, thereby resulting in the downfall of traditional music retailers such as HMV. Since 2007, the company had tried to introduce specific reforms to improve its market position, yet the efforts had been unsuccessful. The company’s strategy could be divided into two broad forms. Firstly, to protect and revitalize core business by improving its digital business through cyclical games market and digital products. Re-launching of the online stores was another significant investment that HMV had made to salvage its glory. Despite best efforts, HMV has been unsuccessful in restoring its share in the market.  

Reference List
  • Day, E. and Barksdale, H.C., 1994. Organizational Purchasing of Professional Services: The Process of Selecting Providers. Journal of Business & Industrial Marketing, 9(3), pp.44 – 51.

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