HMV BOYCOTTS WARNER RECORDS !

yeah, i heard of this...it's some dispute over wholesale pricing...i don't quite get it thougth. i heard about it on much music, so it may apply to canada. who knows...it's gonna piss me off royally if that happens seeing that i buy a lot of my cds from hmv!

All I know about this story is what I've read on this thread but the idea of HMV boycotting Warner Records sounds utterly stupid. So if HMV stops buying products from Warner Records on the grounds that their wholesale prices are too high what will happen? Customers who want to buy albums by artists on Warner Records will buy them from other retailers who will buy in more Warner Records products than before because HMV has relinquished its market share. HMV's takings will go down but Warner Records' takings will remain the same. Warner Records will not change its wholesale prices and eventually someone in HMV will realise that the idea of boycotting Warner Records products is only hurting HMV and will quietly lift the ban.

Something similar happened in Britain a few years ago when some retailers realised that they could import albums in other European Union countries (where wholesale prices were lower than in the UK) and still charge less than other retailers who bought the albums in the UK. Some of the major record companies weren't happy about this but realised that what these retailers were doing was perfectly legal so they started releasing two versions of major new releases albums - one with (for the sake of example) twelve tracks sold in the UK at the UK wholesale price and one with ten tracks sold in the rest of Europe at a lower wholesale price. This left retailers with a difficult choice: either buy the UK version, pay the higher price and try to pass it on to customers or import the European version which some customers may be happy to buy because it was cheaper but others may not because it had fewer tracks. Whilst retailers could hedge their bets and buy both versions (although if they did they had to explain to customers why there were two versions of a new album at different prices) ultimately it was a no-win situation for them and for this and a number of other reasons a large number of smaller record retailers either decided to get out whilst they still could or went out of business.

I don't know if there is a similar difference between wholesale prices in the US and in Canada (or possibly even in Mexico which is in NAFTA, isn't it?) but as far as the battle between HMV and Warner Records is concerned it doesn't really matter because I cannot see how HMV can possibly win and force Warner Records to cut their wholesale prices (if every retailer boycotted Warners it might happen but if some didn't it wouldn't happen). As long as customers have a choice of where they buy music music retailers don't have any choice but to try to sell as much music to as many of those customers as they can.

I hope that makes sense and gives you a better understanding of what may be happening. If anyone finds anything that may shed any more light on what is happening please pass it on (and especially if you can supply a link to a newspaper or magazine article).

Thank you very much for the article and the link. I put it through a piece of translation software I got free with a computer magazine and it translated enough for the article to make sense (I apologise for resorting to cheating - I was very good at French at school until I passed my exams in the subject, after which I forgot almost everything I learned).

The key line in the article seems to be the penultimate sentence in the third paragraph which the software has translated as "According to a article published in the daily newspaper Toronto Star on last 5 July, HMV would like to increase its margin of profit on the sale of the discs, at the expense of the producing company." HMV may want to increase its profit margin on Warner Records products (although why it has singled out Warners is not explained - when I worked in the industry in the UK there was little or no difference between the wholesale prices of the major record companies) but if they think they can do so at the expense of record companies they are living in dreamland. The music industry is already struggling as a result of the rise of Napster and its replacements, the decline or disappearance of many major artists and the sprialling costs of recording, promoting and (if they don't recoup their advances) dropping new acts so the last thing they are going to do is cut their wholesale prices. If you're thinking that cutting their wholesale prices might boost flagging sales that is a possibility but that would only happen if the price cut was passed on to customers in lower retail prices (something it seems HMV Canada don't intend to do) and if it was the effect would probably be marginal when you consider that people can get music for little or nothing from file-sharing networks.

If the management of HMV Canada think that the key to increasing profits in music retailing is increasing profit margins then either music retailing in Canada is very different to music retailing in Britain or the management of HMV Canada don't understand music retailing. The days when the major music retailers in Britain could sell products at prices they wanted consumers to pay (which included a reasonable profit margin) are long gone: nowadays they either sell it at the same price as their competitors (which are the major supermarkets almost all of which sell chart albums in many of their stores, smaller independent retailers or retail websites) or they don't sell it at all because people buy it cheaper elsewhere. Increased competition has driven the price of chart albums down so far that in some cases the retail price is only just over the wholesale price. You simply can't increase profits by increasing margins: the only ways to increase profits are to cut costs (which means cutting the number of staff which means customers have to wait longer to be served) or to increase turnover (which means keeping prices as low as possible and selling as much as you can as quickly as you can). If the management of HMV Canada want higher profits they are going to have to earn them.

yeah, you can't get the new chili peppers album at hmv yesterday...what the hell is hmv thinking? I think they're gonna be the losers in this battle...cuz hmv isn't as big as warner, and it's not gonna make a big difference to them, a multi-national huge corporation.

We have similar kinda stoush between music retailers and record labels in Australia a few years ago....when the government allowed importing of music products from our neighbour, Indonesia. A few retailers decided to sell 2 versions with the Indonesian version at about 30% cheaper but these titles were limited to your local top50 kinda acts ( I still could not find the Indon version of Get Ready, though my friend got me a Malaysian pirate one...) Then the record labels retaliated by releasing CDs with 'Australian only limited edition' with bonus tracks or bonus CD.....which is good from the fans point of view..

See, you just have to kick these record companies a bit in the arse...and they'll cough up some bonuses for fans....

Chris, the organised boycott in the 80's you described was before my time in the business but I can't imagine something similar happening now because music retailers face competition from the major supermarkets (who aren't that bothered about dealer prices and margins because they know that when it comes to making profits turnover is just as important, if not more important, and that some customers like the convenience of being able to buy chart CDs with their weekly shopping) and net retailers (who don't have to pay the sky-high rents that music retailers in shopping malls and some city centres have to). Besides, if a particular music retailer is struggling I doubt others would try to help it: they would rather stand back in the hope that it would go out of business and some of its customers will come to them in future.

However, if there was an organised boycott by a range of retailers I doubt Warner Records would reduce its prices because the major record companies are trying to get the digital distribution of music up and running. Whilst the arrival of Napster and other file-sharing networks has had an effect on sales and the record companies have tried to close them down because they are aiding and abetting breach of copyright the success of these networks has shown to the major record companies that the digital distribution of music (and even films) is possible even when most people are using 56K modems. If a faster and more reliable network becomes a reality and anti-piracy systems can be improved the majors (most of whom also make or distribute films) will want to distribute music and movies digitally direct to customers because then they can cut out the middlemen (retailers). Instead of shops paying the record companies X for a CD or DVD disc and those retailers selling them to customers for Y in future the majors will sell them direct to the customers at a price somewhere between X and Y.