Posted on | January 5, 2011 | No Comments
Following a previous post on the bankruptcy of Columbia House of Canada, here is another story pointing to the slow decay of a once powerful industry. British company HMV said today that it would close 60 stores in England. Furthermore, HMV would have difficulties paying off one of its loans. These releases of course brought down the stock value by 20%.
Already in 2009, rival company Virgin had turned its back on its own stores. HMV had seized the opportunity to expand further in North America. Obviously this strategy hasn’t paid off. Meanwhile, entertainment groups which consolidated their content creation activities with distribution activities seem to be faring better. This is the case for Time Warner Inc, which is slowly recovering from heavy losses incurred during the recession. The industry leader remains Disney, which is quite healthy and has disclosed record-high revenues during its last fiscal year (over 38 billion dollars).
Diversification pays off, no matter how you distribute your product. Amazon.com has raked in 24.5 billion in 2009 and is nearing 30 billion for 2010. Apple will bust the 60 billion mark. Not surprisingly, the same kind of consolidation occurs in Canada’s entertainment industry: Molson bought the Montreal Canadiens, Rogers is eying the Maple Leafs, and Quebecor is trying hard to bring a NHL team to Quebec City.
Consolidation is worrisome when it involves information media, however. To prevent the kind of collateral damage happening south of the border, should the CRTC get a broader mandate or more muscle power? To allow diversity in information content, should producers be subsidized even more and, if so, where should the money come from? Should advertisement revenues be taxed? Should broadcasters be prevented from creating information content, but forced to broadcast them? Or am I too much of an alarmist?
Quality information does not only have the commercial dimension of entertainment, otherwise markets could deal with this problem. We must ensure that the rules in place work, or otherwise create new ones.