Friday, 29 June 2007

How capitalism works... in the music business

Slightly off topic but I thought the news that music store Fopp might go into administration is worthy of a closer look (not least because Fopp is a really good place to get cheap CDs if you want to fill in your back catalogue, so it would be a shame to see it go under).

The news that Fopp may go into administration is blamed on -

the rise of supermarkets and online retailers selling CDs and DVDs, as well as the surging popularity of downloading music from the internet.

The strange thing is that it was only earlier this year that Fopp massively increased its number of stores. In February it bought 67 stores off rival chain Music Zone. Now this Manchester-based company had recently gone into administration, which was blamed on -

competition from online retailers and supermarkets.

Funnily enough, Music Zone itself had only recently gone through something of an expansion. In January 2006 it acquired 41 shops from the collapsed retailer MVC. You see MVC had gone into administrion just before Christmas, a moved which was blamed on -

tough competition from supermarkets, as well as increased music and film piracy.

And going one further step back down the chain, MVC itself acquired the stores from Woolworths back in August 2005. The other snippet in the first stage of the story worth noting is that a private equity firm had been sniffing around Woolies, but was put off by the music store bit off the business.

What's the moral? I'm not sure. Is it that lots of businesses can fail to spot a dying market? That the private equity mob really do know what they are doing? Or is it simply that online music has sounded the deathknell for most record shops and this is finally being played out? Given that my music purchases are now about ten to one online versus CDs (and even then mostly from Amazon) maybe it's just another example of the constant reinvention within markets.

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