HMV Canada is hoping a new online streaming subscription service will help the venerable music retailer recover from a year marred by store closures and the ongoing decrease in physical music sales.
The company is looking to launch its streaming service in March, said HMV Canada president Nick Williams in a recent interview.
By the time it launches, the new venture should face competition from a number of other services including Rdio, Slacker Radio, Rara and Deezer.
But Mr. Williams is confident that HMV will have no trouble standing out in that marketplace.
“I think we're more than capable of overachieving against (the competition),” Mr. Williams said.
“The brand is strong enough ... that we can talk with authority and with confidence and of course, people trust the brand.”
Mr. Williams says HMV's streaming service will charge the industry-standard $5 per month for unlimited access through a computer and an additional $5 a month for mobile access.
While new streaming services are now entering the Canadian market at a steady pace, none have taken hold the way Spotify has internationally, so Mr. Williams sees an opportunity.
For one thing, Mr. Williams argues that few people have actually signed up to pay for streaming online.
“A lot of it is early adopters only at the moment, in fact I'd argue that most of the people who signed up for these are industry people,” he said.
He also points out that HMV has a pre-existing relationship with Canadian record labels as well as the expertise to build a competitive catalogue of music. And since 2009, HMV has operated a digital retail shop with more than 10 million MP3s for sale, and has studied how its consumers have responded to the service.
But the music retailer's biggest advantage, he argues, might lie in marketing.
“A challenge I think all these startups have ... is that they haven't got a consumer base to talk to,” Mr. Williams said.
“So they have to have an enormous marketing chest to start to try to work out how they get to the consumer. I think the big opportunity for us is, clearly, we have 35.5 million people walking through our doors every year ... who we can talk to, and actually sell this model to, using language I guess that people probably more readily understand.”
Of course, the company is also banking on the fact that music consumers will continue to move away from buying physical albums.
The company has become drastically less reliant on CD sales to fuel its overall business. Physical album sales now make up roughly a third of HMV's sales revenue, down from over 90 per cent a decade ago. Mr. Williams expects that to continue, although at a slower pace than has been predicted by some industry pundits (he still believes there's an appetite for physical music, especially in Canada).
HMV has responded to decreasing music sales by scaling down the number and size of its stores. Two B.C. locations — including a flagship Vancouver superstore — will close in early 2012, while the company's iconic location in Toronto has already downsized. Williams acknowledges the possibility that more of the company's 100-plus stores could be closed or shrunk in the years to come.
Mr. Williams says the company is moving toward “boutique”-style spaces, and he now pegs the ideal store size at roughly 3,500 to 5,000 square feet.
He says the company will still try to accommodate public appearances from artists even in the smaller locations, though he concedes that it's become “more and more difficult” to do so with the struggling industry. But the days of the music superstore are largely in the past.
“If I'm honest, because of the pressures that are building through other avenues of purchase — online and in our case digital — there's just no requirement for a footprint of that size any more,” he said.
“When it was all physical, and everybody was shopping on the street and in the malls, and you couldn't buy digitally, then of course, the bigger the store, the better.... But in reality now, the footprint size for all retail is decreasing.”