Years ago, in a hot summer of the mid-1980s, I tried to impress a young student who had come over from Dublin on the boat and train to London where I was working in a bar on Kensington High Street. She was already in college and I had just done my Leaving Cert so I was punching well above my weight. The stakes were high.
In the years before texting, mobiles or email, a rendezvous had to be planned in advance and, at the age of 17, the place you chose to meet was a significant marker about the type of person you were. I wracked my brains as to where it might be. Where could I meet that would send a signal I was copped on, cool and worth the effort?
Maybe Camden Market? But you might miss each other there. What about somewhere in Soho, maybe the Coach and Horses pub? But I ran the risk of not getting in and the mortification of being kicked out of a pub for being too young.
Of course there was only one destination. It had to be outside HMV on Oxford Street, where I would wait casually reading a copy of ‘NME’, smoking nonchalantly. HMV was ground zero. It was the hippest place in London that I knew. After all, Dublin didn’t have HMV back then. It was an exotic place we read about in ‘Melody Maker’ with rows and rows of records, 12-inch singles, original coloured vinyl singles, obscure bands, Japanese imports — the lot.
The demise of HMV is a lesson in appalling management and the failure to take new opportunities presented by changing shopping habits. It is the story of the internet and a harsh lesson in disruptive technologies and how they can destroy businesses.
It shows how changes in technology change people’s expectations and even though a company like HMV, with the brand and the resources it has, should wipe the floor with the competition using the new technology; if it chooses not to embrace the change, it will be eliminated.
In economics this process is called “creative destruction” and forms the basis of what is known as the Austrian school. The story of HMV is the story of corporate Darwinism, where only the fittest survive.
Back in the 1980s, in my world of music, HMV was king and that was before the CD revolution. The introduction of CDs heralded the Golden Age for HMV when people replaced entire music collections with these new “unscratchable” CDs. Punters were paying the equivalent of €18 on new CDs in the 1990s.
How many living rooms do you know that were devoted to shiny new CD shelves in the 1990s? These public displays of musical taste and sophistication were a must in any self-respecting new flat. Today the CD collection is such an interiors dinosaur that it will probably become hip again. For fashionistas, the redundant CD holder may become the woolly Christmas jumper of interior design displayed by those in the know with a hipster’s sense of irony.
But for HMV, the collapse of the CD market — driven by downloading — signalled the end. In addition, HMV’s belief that consumers wouldn’t be attracted by the discounting of the likes of Tesco, which sold CDs for half nothing, proved fatal.
But in the 1990s and 2000s, HMV, fat on the proceeds of expensive CDs and DVDs, opened up dozens of shops in cities all over Europe and it also bought up bookshops such as Waterstones. In 2002 it floated on the stock market. Its shares were worth over €2 initially and this valued the company at well over €1bn.
Last year the company was worth a mere €21m. That’s quite a fall. Today of course, it’s worth nothing. Yet it didn’t have to be this way.
Over the past few years, even when it was becoming obvious that people were downloading, the management of HMV did nothing online. Even before Christmas, I went on its website to price the difference between various PlayStation models for my son’s present and it was impossible to navigate. The website was awful.
Here was the company that should have wiped the floor of the competition in the new internet age yet it appeared frozen in time. It was as if by the time the management has cottoned on to the fact that the world had changed, they had decided it was too late and had thrown in the towel.
Yet when you think about it, who was better placed to exploit the internet than HMV with the power of the brand, their heritage in music, their unrivalled access to content from film, game and music companies? Who would have been better placed to take advantage of social media?
Now it’s gone. The biggest brand in music retailing, the company that struck fear in the hearts of record companies such was its dominance in the trade, and the company that young Irish lads associated with the pinnacle of cool in London of the 1980s. Here is the company that was making so much money in the 1990s in CDs that its chief executive was called before a House of Commons select committee in the UK to explain why it was charging so much for CDs.
Its answer then was that that was the price that the market would bear.
Today a new market has given its answer to the company. HMV at any price is more than the market can bear.
The lesson for all of us — all of us who are in any business selling something to someone else — is that there is no comparative advantage. If you are doing well, all you have is a temporary monopoly and soon someone else will come along and grab your market share. That competitor might be driven by technological change or just simply be better than you. This is the nature of corporate Darwinism and it is all around us.
Equally, countries that believed they had a unique advantage, such as a low corporation tax, for example, will be copied by others. Or perhaps their “beggar thy neighbour” approach might become deeply unfashionable as tastes change and global corporate tax avoidance becomes intolerable.
This is the challenge.
HMV should be a warning to the complacent.
Update: By the way, the following weekend, having passed the cool test by meeting at HMV, I brought my teenage love to the Notting Hill Carnival to assure her of my unassailable hip credentials. Not my cleverest moment; before the end of the day she’d gone off with a Trustifarian waving a bong.
Creative destruction anyone?
David McWilliams’ new book The Good Room is out now
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“Creative Destruction” – the motif of the article, is often attributed to Schumpeter, and the Economist Magazine has a Schumpeter Column regularly today. While Joseph Schumpeter left Germany in 1932 and lived the rest of his life in the United States, teaching at Harvard, the man who first promoted the concept of “creative destruction” was a died-in-the-wool Nazi named Werner Sombart. Sombart credited Friedrich Nietzsche with the origin of the term and concept, but passed it along to Schumpeter. Sombart, who was denounced by Rosa Luxemburg as a one-time Marxist who became an apologist for German imperialism, was a close… Read more »
ha – nice headline
Records & Spuds
Are you roasting them or boiling them ?
It’s a business lesson that comes from way back in the old days when record shops were as popular on the high street as a bookie is today. It’s from the band (and business guru) Bananarama…
“It ain’t what you do, it’s the way that you do it. And that’s what gets results.”
I think you are right to raise the issue of low corporation tax. It does not bring Ireland the jobs that common wisdom would have us believe. As a manager of a company I would be happier to pay higher corporation tax if other aspects of the Irish economy were fixed. e.g we need proper and varied sources of credit in Ireland. Low corporation tax does not facilitate the creation of new companies, in fact it works against that happening. Given the fact the Ireland Inc has subsidised the operations of multi-nationals here, they can afford to offer higher salaries… Read more »
Everyone is reminiscing sadly about when they bought their first CD – Bruce Springfields “Nebraska”, HMV , Oxford Street, 1982!
Or met the opposite sex for the first time as they fiddled through the racks of records or flicked through the posters of Cyndi Lauper!
But they obviously don’t miss it that much, or they’d have gone there, and bought the stuff!
Instead we download it from iTunes or stream it on Spotify. Because it’s easier, and cheaper, and there’s more choice.
“You cannot buck the market”, as a British PM once said – how right she was!
DMcW : “The story of HMV is the story of corporate Darwinism, where only the fittest survive”. Darwin plagiarized from Malthus, published “On the Origin of Species by Means of Natural Selection, or the Preservation of Favoured Races in the Struggle for Life”, and nephew Galton carried on the family tradition to eugenics. The full title is avoided by the squeamish, but we do see favored global companies, and even entire former nations. The lawful result of this is eugenics for companies and entire nations not favored, in other words “creative destruction”. Gives new meaning to “curry favor”? Begging for… Read more »
Ah David, as someone of a similar age category and growing up in the age of vinyl, casette, CDs and downloadables (jeez what’s next) reading your blog piece made me sad and nostalgic. I work in an industry that is also dying on its knees due to its inability to face up to the truth and I see it dying in a way like HMV. Management needs to wake up and see who or what is snapping at their heels. I’ve not much more to add only to say I really enjoyed the blog.
HMV – total rip off merchants. What goes around comes around.
Enjoyed the article.
(Would you consider doing an article on the subject of the petrodollar? A little known subject with big ramifications that is NEVER mentioned in the mainstream.)
Yeah we need creative destruction in the political system, and the social structures that imprison the potential of human goodness and creativity! But unfortunately we hear always the same old record: -Excessive salaries and conditions in the Public Sector are protected by the Constitution. -Excessive wealth in the hands of speculators who doesn’t invest in infrastructure or the productive economy can not be taxed at high rates, and also are protected by the Constitution. – People in debt don’t get partial debt forgiveness but most of our political representatives allow Banks to convert their speculative debt, in National Debt. So… Read more »
“The lesson for all of us — all of us who are in any business selling something to someone else — is that there is no comparative advantage”…. In general David – yes – very very true. However there are always those select few that become so good at what they do that they while they will always respect the competition; they will not, nor should not fear it. There will always be a market for the best gamechangers in the world. And how do you become a sustainable gamechanger – you outwork the competition; you out learn the competition;… Read more »
PRESENTLY 90,00 PEOPLE WORK IN IRELAND’S EXPENSIVE EDUCATION. HOW MANY WILL IT EMPLOY IN 10 YRS TIME ? YOU CAN DO EVERYTHING ON THE WEB, IT’S ONLY A MATTER OF TIME BEFORE IVY LEAGUE COLLEGES OFFER 2 YR DEGREE COURSES FOR 2K. JUST EMPLOY RETIRED LECTURERS TO DO THE WORK. EDUCATION WILL SEE THE SAME SHAKE OUT AS THE MUSIC/BOOK INDUSTRIES. IT WILL SAVE A FORTUNE IN CURRENT AND BUILDING COSTS. WHERE WILL THE REPLACEMENT JOBS COME FROM ? PRODUCTIVITY IS ABOUT USING LESS LABOUR, INCREASING OUTPUT SIMULTANEOUSLY MEANS MORE LEISURE / POVERTY TIME.
Loved the article David, but a minor point: Darwin didn’t refer to survival of the fittest. He actually said “it is not strongest of the species that survive, nor the most intelligent that survives. It is the one that is most adaptable to change”.
…which I think reinforces your argument even better.
Keep up the good work, looking forward to reading your book!
Very interesting article David. There is an awful lot more to Austrian economics than “creative destruction” and all of it very relevant to our current woes but it is good to see you mention this important branch of economic thought. Despite what Bonbon says this concept of creative destruction is a very natural phenomenon in business. When the steam train came along it was the natural end for the popular horse and carriage industry of the time. Those who adapt to the new technology quickest fare the best. Despite Bonbon’s pseudo intellectual claptrap this is a normal part of the… Read more »
I’m all right Jack keep your hands off my stack. Pink Floyd on money it can be found on a LP on A CD on MP3 on screen here; but not in my wallet and some more money for free here yes free money who needs HMV or amazon et al…. http://www.youtube.com/watch?feature=player_embedded&v=ZwU8QeW4ofU#! “Money” Money, get away Get a good job with more pay and your O.K. Money it’s a gas Grab that cash with both hands and make a stash New car, caviar, four star daydream, Think I’ll buy me a football team Money get back Money it’s a hit… Read more »
Having lived my 70 years grubbing about outside the intellectual milieu it is has been my pseudo-scientific observation throughout my visit to this Galápagos of life that, at least as far as the human species is concerned, that it is the survival of the meanest. It has been my pseudo-intellectual observation that one can be the “fittest”, most “adaptable”, most “intelligent”, most “favored”, “strongest” etc. etc. only to be outdone every time by a fellow human meaner than you. Maybe it’s because we humans are the meanest animal on the planet that we have succeeded in dominating all the others.… Read more »
we work to make stuff which is then tossed on a dump. we are poisoning ourselves.. sorry we used to, now we export the poison to China. this week the Chinese in Beijing have had to stay indoors some are dying thanks to junk stuff.
but profit comes first
HMV = Hoover Mooned Vacuumed Its amazing . Isn’t it ? Hellicopter Economics happened in heart of London on the 7th Day before Full Moon . As I said in an earlier posting last week the Elements of Water and Fire play a pivotal role in this moon and the forthcoming Moon Wobble later in Feb peaking on the eve of the USA cliff Hanger deadline 14th Feb. Why did the Hellicopter crash yesterday ? What is evident is heavy clouds ( water ) and explosion ( fire).Exploding in center of London …now thats not common? So in the same… Read more »
For those advocating a return to the British Gold Standard, this is a must read – the history of central banking. Absolutely fascinating.
The Modern AngloDutch Empire:
its Origins, Evolution, and Anti-Human Outlook
For instance the modern central banking was started first in Amsterdam, from Venice, and then to England. And it was a private gold based system. There is much more here for anyone willing to look beyond appearances today.
“Creative Destruction” ? Why Obama Wears the Moustache Excerpts : “We live in the Age of Creative Destruction, the term coined by the pre-war economist Joseph Schumpeter.” –Franklin R. Raines, then-CEO of Fannie Mae Larry Summers on the White House Office of Social Innovation and Civic Participation website, which stated, in part: “An important aspect of any economic expansion is the role innovation plays as an engine of economic growth. In this regard, the most important economist of the twenty-first century might actually turn out to be not Smith or Keynes, but Joseph Schumpeter. One of Schumpeter’s most important contributions… Read more »
Nice reminiscence of HMV David. At the risk of digging myself a prediction hole, I think we’ll be saying the same thing about Apple in 5 years time (for the second time) & not because of the passing of Steve Jobs (because Jonathan Ive contributed probably more creatively than Jobs) but because their value-add is design (they assemble components developed by other companies), design has a low-barrier-to-entry & tastes change. The positive for them is that they are so cash-rich they can just acquire the next innovation or two if necessary, but this has its limits and the continued attack… Read more »
Picking up on the earlier comment about incandescent light bulbs, the nephew of a friend worked for a major UK white goods company as a development technician.
One of their briefs was to design a paint that would yellow after a number of years, the intention being that the lady of the house would perceive the product as ‘getting old’.
In spite of what some here believe; the central banking system of the Western nations is not publicly controlled. It is either privately owned, as in the case of the Federal Reserve of America; or is privately controlled by mechanisms other than outright ownership. The Fed is owned by the private banks of the Federal Reserve System. They control it; not the government in Washington. It is a fact of the Federal Reserve Bill that the Fed is independent of government control: http://www.federalreserve.gov/faqs/about_12799.htm The TV interview where this is explicitly stated by Greenspan is well known: https://www.youtube.com/watch?v=XuT5diLDPpE That the Fed… Read more »
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100022332/a-new-gold-standard-is-being-born/
Gold is the money of last resort. Those that ignore this trend will like HMV end in the dustbin of history
Irelands gold will prove to have been stored in an unsafe
Never heard of HMV, but Ive only been here 9 years so go figure.
Irish language making international headlines as Killer gets Electrocuted in Va. and final words are in Gaelic!
Go diaspora!
Never heard of HMV, but Ive only been here 9 years so go figure.
Irish language making international headlines as Killer gets Electrocuted in Va. and final words are in Gaelic!
Godiaspora! http://www.nydailynews.com/news/crime/killer-vowed-strike-put-death-va-article-1.1241730
http://www.musicweek.com/news/read/hmv-50-parties-interested-including-game/053224
Game may purchase some of the HMV stores; seems not the irish ones though.
That was a fine read and brought back memories of England in the 80s. I laughed about the stakes being high and her running off with a Brian Jones type and I liked the last para taking a kick at the gov’t Yes HMV is a shocker and it will not be the same walking down Argyle Street in Glasgow and not seeing the famous store. I think they have (had) three stores over there Before HMV there were independent record shops across the city. One of them specialised in Jazz and Blues and one was a punk hang out.… Read more »
Not just HMV. The huge Virgin Megastore on the Champs Elysées closed a few weeks ago (once a very trendy place to go to, with its upstairs café & restaurant, and open until midnight).
I prefer to talk about disruptive technology rather than creative destruction (the economics term).
It is fascinating to observe everything that is happening on the disruptive technology front. Look at the all sectors and jobs which are being created.
re central banking & governments 1. In spite of what some here believe; the central banking system of the Western nations is not publicly controlled. It is either privately owned, as in the case of the Federal Reserve of America; or is privately controlled by mechanisms other than outright ownership. The Fed is owned by the private banks of the Federal Reserve System. They control it; not the government in Washington. It is a fact of the Federal Reserve Bill that the Fed is independent of government control: http://www.federalreserve.gov/faqs/about_12799.htm The TV interview where this is explicitly stated by Greenspan is… Read more »
Natural Selection! We are of nature therefore everything we do is natural but we have moved on from survival of the fittest to survival of greedy. What is the next step? Are we mature enough? Are we at an evolutionary crossroads? Or do we continue to phrase the values of money god(whatever the money is made of)? Should we move to the next logical phase in our evolutionary future or will we self destruct with the Naturally Selective impulse for greed? It seems at present we are doomed to destroy ourselves – Naturally?… Oh My! I am getting old! Maybe… Read more »
“Twelve voices were shouting in anger, and they were all alike. No question,
now, what had happened to the faces of the pigs. The creatures outside looked
from pig to man, and from man to pig, and from pig to man again; but already
it was impossible to say which was which.”
Orwell himself was was a face changer….
NON-FATAL OFFENCES AGAINST THE PERSON ACT, 1997 Demands for payment of debt causing alarm, etc. 11.–(1) A person who makes any demand for payment of a debt shall be guilty of an offence if– (a) the demands by reason of their frequency are calculated to subject the debtor or a member of the family of the debtor to alarm, distress or humiliation, or (b) the person falsely represents that criminal proceedings lie for non-payment of the debt, or (c) the person falsely represents that he or she is authorised in some official capacity to enforce payment, or (d) the person… Read more »
Undressing glass Steagall
“In the case of Glass-Steagall, one could argue that it did not appreciably “calm” the markets in the 20th century because the problem it was addressing had to do with Fed overprinting of money, probably on purpose to get rid of the gold standard.
Thus, what Congress should have removed was the central bank, not the ability of this or that private bank to trade proprietarily, something they’d done successfully for decades”
http://www.thedailybell.com/28591/Professor-Misstates-Glass-Steagall-History
Dallas Fed President Richard Fisher Calls for End to Bailout of “Shadow Banking” In a speech delivered January 16 in Washington, D.C., Dallas Federal Reserve President Richard W. Fisher called for an end to the protection of banks which are “Too Big to Fail” (TBTF), and offered what his office is calling a “common sense approach” to banking reform. His proposal is for a kind of bank separation embodied under Glass-Steagall, although he did not call for it by name: “Only the resulting downsized commercial banking operations – and not shadow banking affiliates or the parent company – would benefit… Read more »
FDIC Vice-Chair Thomas Hoenig: Remove the Safety Net from Non-bank Activities, Return to Glass-Steagall Framework
Thomas M. Hoenig, Vice-Chairman of the Federal Deposit Insurance Corporation, urged that the problem of “too big to fail” banks be solved by removing the “safety net” of Federal insurance from non-bank activities, since without it, the largest banks will shrink drastically, as investors demand that these banks hold stronger assets, in an article today in American Banker newsletter.
here there is more and a link to American Banker.
In spite of what some here believe; the central banking system of the Western nations is not publicly controlled. It is either privately owned, as in the case of the Federal Reserve of America; or is privately controlled by mechanisms other than outright ownership. The Fed is owned by the private banks of the Federal Reserve System. They control it; not the government in Washington. It is a fact of the Federal Reserve Bill that the Fed is independent of government control: [The urls were causing a problem to post. Go to the Central Bank sites to read the fact… Read more »
How the system really works.From http://www.realityzone.com/currentperiod.html ————————————- Curtis & Leroy saw an ad in the Starkville Daily in Starkville, MS, and bought a mule for $100. The farmer agreed to deliver the mule the next day. The next morning the farmer drove up and said, “Sorry, fellows, I have some bad news, your mule died last night.” Curtis & Leroy replied, “Well, just give us our money back.” The farmer said, “Can’t do that. I spent it already.” They said, “Then, just bring us the dead mule.” The farmer asked, “What in the world ya’ll gonna do with a dead… Read more »
http://www.ecb.int/ecb/legal/pdf/en_headquarters_agreement_final.pdf
@ Tony Brogan To my perception libertarians are a grassroots manifestation of neoliberalism. The main funders & organisers of the libertarian movement in the USA are billionaires such as the Koch brothers, Peter Peterson and others. They are neoliberals; free marketeers. Their intention is not the liberty of the human individual; it is the liberty of the legal persons known as corporations they are really promoting. They would not fund and promote a movement which would threaten their corporate possessions or elite privileges. In the transnational new world order which the corporate elites are constructing, corporate liberty will trump national… Read more »
Silver bullion scarce. US mint has suspended sales of silver eagle.
Gold bullion still available
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/1/18_Greyerz_-_We_Are_Now_Seeing_Massive_Shortages_Of_Silver.html
CORPORATE FASCISM IS A USEFUL MASK.
NO PUBLICLY TRADED HERE.
BIGGEST CORPORATIONS ARE INVISIBLE PRIVATE EMPIRES.
SECRET MEETINGS SECRET OATHS.
A CORPORATION IS JUST A VEHICLE.
SOON TO BE ABOVE SOVEREIGNTY.
WHO IS IN THE DRIVING SEAT?
“Creative destruction”? What does it mean?
Martin Luther King : “I have a Dream”.
Obama : “I have a Drone”.
The destruction of creativity has led to this.
Obama will be “inaugurated on the MLK holiday, the spirit of Dr. King will be elsewhere” headlined Huffington Post blogger Norman Solomon on Jan-16th.
@ Tony Brogan
Exactly right Tony. What is unfolding is a transnational corporate coup. Not so much a merge of corporations & government as a usurpation of government by a transnational elite.
Check out the Trans-Pacific-Partnership. It is a so-called free trade treaty being constructed by the elite Corps which when/if implemented will seal the deal; and be the death knell for the era of the nation state.
We are exiting the era of the sovereign nation state.
I do not believe France will part with any Gold repatriation to Germany and instead will delay the request by obfuscation and blind issues and red herrings relating to outstanding compensation relating to WW2.
Does the depression of 1929 look worse than the 2008 depression colour photography is less dramatic than black and white
John Steinbeck- The grapes of wrath part 2 is coming soon to a cinema near you in glorious digital wide screen and in 2d, 3D, and at 48 frames per sec. with 7:1 surround sound.
Now out on XBox and PlayStation with multi player online versions, you can control the money and eviction notices.
Does the depression of 1929 look worse than the 2008 depression, colour photography is less dramatic than black and white photography.
John Steinbeck’s – The grapes of wrath part 2 is coming soon to a cinema near you in glorious digital wide screen and in 2d, 3D, 48 frames per sec. with 7:1 surround sound.
Now out on XBox and PlayStation with multi player online versions, where you can control the money and eviction notices special discounts for the dispossessed
Back the HMV;
It seems they took people’s money in gift “VOUCHERS” over the Christmas period then they went bankrupt and it is the banks they get the people’s money again.
VOUCHER; modern definition:
A worthlessness piece of paper in exchange money work done by fool or the fooled???