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 â‚¬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 â‚¬2 initially and this valued the company at well over â‚¬1bn.
Last year the company was worth a mere â‚¬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 bookÂ The Good Room is out now