Death By Download

The smouldering debate about illegal downloads flared up at the beginning of the year, sparked by the news that HMV’s Christmas sales were down 14 percent and industry figures showing UK album sales down 7 percent on last year.

The music, films, books and games retailer with interests in venues, festivals and artist management warned full-year profit would be at the lower end of analysts’ estimates and that it may struggle to meet its bank covenants.

The company immediately announced it would shutter 60 stores, 20 of them Waterstone’s book shops. Its share price, which had already lost two-thirds of its value in 2010, tumbled a further 24.6 percent to 24.5 pence. It rallied toward the end of the week and closed at 27 pence Jan. 7.

HMV blamed the slump on illegal downloads, competition from supermarkets, and the UK suffering from a winter blast of almost biblical proportions.

During the last two weeks of 2010, analysts started slashing profit forecasts for the company. They said HMV chief exec Simon Fox needed to curb his 360-degree strategy – that’s seen the music retailer branch out into venues, festivals and artist management – and find a “Plan B” or risk a forced breakup of the group.

Borders UK, Woolworths, and Zavvi have all collapsed in the last two years, while the latest album sales figures have drawn another frantic piracy warning from an increasingly apoplectic British Recorded Music Industry (BPI).

BPI chief exec Geoff Taylor called for “meaningful action” against illegal downloading, seemingly accepting that the action his organisation had previously called for and won – the Digital Economy Act – isn’t really that meaningful right now.

The new anti-piracy law, which was rushed through in the last days of the outgoing Labour government, has caused a High Court judge to complain that he’s running out of patience with the way the lawyers acting for the record companies are trying to enforce it.

They’ve adopted what appears to be a scattergun approach, which means anyone remotely suspected of illegal file-sharing is sent a demand for money.

Deputy Prime Minister Nick Clegg says the act “badly needs to be repealed and the issues revisited,” while major UK Internet companies BT and TalkTalk have won the right to test its legality.

The recorded music industry is likely to be reporting another drop in annual sales at the end of 2011 because it’s doubtful – given the coalition government’s immediate agenda – if there will be any “meaningful action” within a year.

The BPI says digital and physical album sales fell 7 percent last year, from £128.9 million to £119.9 million. Digital album sales were up by 30 percent, which means retail chains such as HMV have seen physical album sales plummet.

The bright spot was that the combined singles market recorded an all-time high of £161.8 million, beating last year’s figure of £152.7 million. Digital singles represented 98 percent of the overall figure.