HMV Enters Live Biz
British music retailer HMV has paid more than £18 million for a half-share in the 11 U.K. music venues owned by MAMA Group Plc.
The company, which reported flat music sales during the usually busy Christmas holiday period, is also buying the rights to re-brand the venues with its name.
HMV expects shareholders will raise about £20 million, about 5 percent of its total equity, to pay for the deal and also the purchase of 14 stores belonging to collapsed retailer Zavvi.
The MAMA deal includes London venues Hammersmith Apollo, The Forum and The Garage.
“Music is very much part of our DNA, and by extending the HMV brand into the growing live music and entertainment market, our customers will be able as never before to access and experience music in all of its forms via HMV,” said chief exec Simon Fox in a statement.
“The live music market is booming, despite these tough times. The physical music market is changing structurally and we need to diversify,” he told The Times.
HMV’s stock rose 2 percent to close at 130p. Jan. 15, the day of the announcement.
The company is also teaming with ticket agency Seatem to sell tickets for live shows, compensating for the way digital music sales continue to eat away at the High Street CD market.
HMV, which also operates the Waterstone’s chain of bookstores, estimates that the live music market in Britain is worth about £1.5 billion, plus the potentials for tie-ins via ticket sales, CD sales and other merchandising.
The moves are part of the plan HMV announced in March 2007 to cut £40 million from annual costs by 2010.
The turnaround plan is aimed at tackling intense competition from Internet retailers and supermarkets, along with the growing popularity of music and film downloads.
In a Jan. 15 trading update, HMV said that bestselling DVDs such as “Mamma Mia!” and “The Dark Knight” and new albums from Leona Lewis and The Killers helped underpin a 3 percent rise in underlying sales in the five weeks to Jan. 3.
Sales at Waterstone’s dropped 2 percent but HMV stresses that restoring the book-seller’s growth remains a priority.
Analysts reacted to the news by saying the company’s core HMV division in Britain appears to be benefiting from “a rebalancing of the product mix in favour of games, a heightened internet platform and “the demise of both Woolworths and Zavvi.”
Some said the company appears confident of raising the capital for the MAMA venues and the Zavvi shops from its existing shareholders.