OK, only 40 are music and video stores; I accept that.
But for those 40 and all who will lose their jobs as a result the question must arise as to how much this is is because the Channel Islands have put a nail in the coffin of the UK High Street by continuing to facilitate offshore VAT abuse?
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Richard, this is driven by technology much more than by tax arbitrage.
Nobody buys CDs or DVDs anymore, whether online or in a store. Everyone downloads them in digital format. HMV is a dying business irrespective of the offshore tax issues.
..and how much is it due to the continued decline of physical CD and DVD sales? I lost count of the number of iTunes and similar vouchers I had to buy as Christmas presents this year, when in previous years CD’s would have been the present.
I do think the increase in VAT will put more pressure on HMRC to shut down the loophole. But will they listen?
@Million Dollar Babe and
@Greg
But you’re both wrong
CD and DVD sales are holding up
Repeating misinformation is not argument
Please refer to the VATloophole site for data
@Million Dollar Babe
Just to let you know that my husband still buys CDs every month. Not everyone has the time or inclination to download music from the internet.
I seem to recollect recently reading in the press that some hedge fund was in the process of speculating on the demise of HMV. Now that their wish has more or less come true, what does this say about values in Britain?
I can’t see the figures obviously on the VAT loophole site. However, this is a Reuters post from today:
http://www.reuters.com/article/idUSLDE70415020110105
The figures quoted suggest that CD sales are down 50% since 2006.
Being an old fashioned sort, I do still like to have CDs, though these days I am at least able to have a listen before buying through sites like Spotify. I remember the annoyance caused in my teenage years from trekking into town, going to HMV, only to find that the album I was after was out of stock.
This doesn’t happen with Amazon. HMV as a business have been slow to adapt to that reality, and whilst I’m sure they will survive in a reduced form, the move to running live music venues could perhaps be their long term future.
@Richard Murphy
“CD and DVD sales are holding up
Repeating misinformation is not argument”
Can you link that assertion.
Because I’d be amazed if you could provide anything that shows anything other than falling CD sales every year for the last several years.
It’s all online these days.
Richard
I couldn’t find the data you refer to on vatloophole.co.uk
I imagine Channel Island VAT abuse is a factor in record store closure but the structural trends are surely more important.
CDs
BPI Chief Executive says “sales of physical CDs continue to trend downwards” http://news.bbc.co.uk/2/hi/8444854.stm
Meanwhile in the US H1 2010 physical CD sales are down 17.9% year over year. No reason to think the UK is different. http://www.digitalmusicnews.com/stories/070810statsnielsen
DVDs.
I imagine DVDs are further behind on the curve but there is no doubt that the long term trend is for streamed movies/TV shows. The leader in the US (Netflix) has significant numbers customers using that service now.
Dear Richard
This has been released by the BPI today:
“5th January 2011 – A third successive record year for singles and the emergence of a mainstream market for digital albums failed to halt a further overall decline in UK music sales in a market that remains heavily distorted by still-increasing levels of illegal downloading, new Official Charts Company data released today by the BPI confirmed.
Combined sales of digital and physical albums overall fell by 7.0% to 119.9m in 2010, with growth in digital sales failing to offset the decline in physical CD sales. Despite the encouraging digital albums sales of 21.0m, growing 30.6% on last year’s sales of 16.1m, the market for CD albums declined 12.4% to 98.5m from 112.5m in 2009.”
The BPI (not I) suggests that it is downloading and not the CI that is the reason for the decline.
Do you reckon that BPI can be relied upon to tell the truth?
Regards
Gregory
@ Richard, I don’t believe the data on the VATloophole website. It doesn’t stack up with other research, and Richard Allen is hardly an impartial observer (not that I would be in his circumstances).
For example, from early in 2010..”BPI chief executive Geoff Taylor said: “Despite difficult trading conditions and the ever-present competition from illegal downloading, UK music sales remained relatively resilient during 2009.
“While sales of physical CDs continue to trend downwards, music fans are clearly responding to the explosive growth of digital retailers and outlets selling and streaming music in the UK. 2009’s record singles result is clearly encouraging.” ”
Source:- http://news.bbc.co.uk/1/hi/8444854.stm
Sorry to all – I thought the data was there
So the markets declining – I thought it had stabilised. Shows I’m not perfect
But it’s hardly gone away either, has it – so I maintain my position and all those who say it’s all digital now are clearly fantasists
It’s a massive market still and the problem is offshoring – not downloading
I personally think that’s indisputable. Even in a declining market HMV could survive on the High Street is the VAT abuse did not kill it
It probably suggests that the hedgies got it right…..
Not sure about 2010, but if you look at this report by the BBC it says that CD (album) sales fell 3.5% in 2009 and 20% since 2004.
http://news.bbc.co.uk/1/hi/8444854.stm
Also if you read Robert Peston’s piece he describes HMV’s problems as follows:
“HMV is plainly facing a structural challenge: competition from the supermarkets, online retailers and digital downloads is intensifying, though that threat was camouflaged to an extent till recently by the windfall HMV received from the collapse of Zavvi and Woolworths (and the demise of Woolworths was a double boon for HMV, because it disrupted wholesale distribution to supermarkets).”
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2011/01/big_winners_and_losers_from_co.html
My own feeling is that the VAT issue re mail order CDs from the channel items have have an impact but it is not the real problem.
Looking ahead a few years I think that sales of CD (and DVDs) bought in a shop or by mail order ,will continue to fall, with digital downloads continuing to grow.
HMV has a long term structural problem. changing treatment of VAT on low value items from the Channel Isles may delay it but only slightly.
If you are correct (and I’m not sure you are) the fact that HMV has a Guernsey based internet operation must mean they’ve contributed to their own downfall!
@Greg
I’m not saying HMV is a great company
All I’m saying is the problem is exacerbated by a VAT abuse
Can anyone really deny that?
If so, how?
@ Richard, i’m not really disagreeing with you. But the fact that HMV have their own VAT abuse “scheme” and yet they still post dreadful results should probably be considered.
I think it is undeniable that, in general, the CI fulfilment industry has damaged UK companies and had a resulting impact on UK tax take. Whilst I blame this 100% on the HMRC, we in Guernsey could have improved our reputation by not allowing the likes of HMV to set up operations here. Yet our politicians said one thing and then did another….
Richard, haven’t got exact figures yet but Q4 Internet sales biggest yet. I’m sure you’ll get the odd posting here saying that the internet is killing the High street but that’s only part of the picture. Anyone ignoring the 20% advantage is in cloud cuckoo land. The real issue is the fact that mainland retail can’t compete with offshore VAT free prices or even sell on the internet due to the same offshore VAT advantage . The fact HMV decided to join in and undercut their stores offshore has cost them dear. Of all retailers in 2005 (the turning point) they had the clout to challenge the UKs application of LVCR . They took the easy route and joined in. Of course if there was no offshore VAT differential we would still see internet vs online but the price differential would not be anywhere near as great and neither I suspect would be the damage to traditional retail. Lets keep this in perspective. Internet is mail order. Mail Order never destroyed traditional retail and has been around at least 100 years. I also know this is not happening in other EU countries where LVCR is not being abused to anywhere near the same degree. The offshore fulfilment industry is a Frankenstein’s monster destroying UK mainland retail.
@Million Dollar Babe Rubbish.
@Chris I know many people selling large quantities of CDs. CD sales were at very high unsustainable levels . They are very far from dead. Rate of decline of CD sales is much lower than rate of decline of UK retail selling CDs. CD sales online up 40% on the internet 2005 -2009, that’s a fact. Of course other formats are increasing market share, if they were not we’d all still be using wax cylinders but CDs far from dead (and vinyl). This nonsense persists in the media… I work in the industry. I see the figures.Whey would people go offshore of it wasn’t worth it ?? Also don’t forget DVDs and Blue Ray. DVD sales down 5% overall since 2005 and up 209% online.
@Gregory Do the BPI tell you that all their major members have signed distribution agreements with offshore retailers. The BPI tell the truth. You clearly don’t work in the music industry.
@Greg Let’s not lose sight of the issue here. Who cares if CD sales are falling. High street has gradually transitioned to online retail ( a basic fact of music retail ) Online retail has had to go offshore due to a market distortion caused by VAT avoidance. That’s the market distortion. It may be masked by the issue of declining music sales but certainly the market distortion has sped up the demise of HMV. Let’s see anyone here argue 20% has no effect. Also what exactly are Play.com Amazon etc selling then ? ??? Downloads were 9% in 2009. Yawn. I get so tired of repeating this. Accountants and music. That’s what destroyed the music industry. Rock and Roll.
If you are correct (and I’m not sure you are) the fact that HMV has a Guernsey based internet operation must mean they’ve contributed to their own downfall!
Ha Ha Ha ! Yes…Exactly. The biggest joke in music retail. They killed themselves. Its pathetic.
@Colman Stephenson HMV as a shop in the long term will of course change or maybe not even exist. Just as one day we will may all live on Mars. So what ? The issue here is the existing tax avoidance on a market that still demands physical product. I have a letter from a Treasury official and they do not yet expect to see the demise of hard formats. Of course what the hell would they know about music, but at least they agree.
@Richard Allen
Dear Richard Allen
I do not work in the industry, I have no idea as to the reliability of the BPI, hence I asked a question. I did not make a statement. Your response is just peculiar.
Regards
Gregory
@Gregory Note the lack of any mention of the VAT loophole in the BPI announcement about market distortion. There is no way they are going to highlight the fact their members benefit from supplying a tax avoidance operation which has increased their sales through lower retail prices. Did you know you only get major label adversing/marketing support if you are registered for the UK chart ? All the offshore retailers supply UK chart returns. The truth …. far from it.
@Gregory The BPI know what’s really going on with Physical product retail, but they would never admit it.
@Gregory OK hows this. The BPI won’t lie but they won’t comment on anything they don’t want any attention drawn to.
How can this pass the moderation policy? What happened to the rules that a reply (i )must be polite and (ii) must contribute to the debate?
@Million Dollar Babe
As Eric Morecambe once said, it’s the way you tell them
I agree it was close to the knuckle
But Richard is well and truly on side and if he short cut using that comment then that’s OK with me
As I say, it’s the way you tell them
Richard has it
You? Well, not always
And the editor’s decision is final – which is the great thing about this liberty thing
How can hmv paying less vat lead to their downfall? Surely its helping stem it, as if onshore it’d more than likely folded by now even before vat rise.
Downloads AND internet shopping (less overheads so lower prices) is why so many established brands are near the brink as it is. Cuts and vat hike may lead to some surprise folds akin to woolworths folding a few years ago.
Isn’t it interesting which posts generate the most commentary!
In fact I don’t think there is any disagreement among commentors that Channel Island VAT abuse is a bad thing and hurts high street CD retailers.
The only issue is the relative weight of the impact vs other pressures in the industry.
Richard,
I am not particularly offended. Frankly, if a contributor’s only ability to engage in a conversation is by way of insults, it says it all.
As for that “liberty thing” (funny) I have come to appreciate it. There is already enough space elsewhere on the web where people can discuss, with whatever language they wish to use, your rights and your wrongs.
So keep it up. You are, if nothing else, great entertainment value.
@Richard Allen
I agree offshore retailing creates a market distortion. Its been going on for years with abuse from US retailers in the UK market music market. UK retailers have copied the practice by locating to the channel islands. It may have been HMV’s long term strategy to close bricks and mortar operations once their online format was established. The EU just needs to remove the low value consignment concession.
@Richard Allen, you say “The real issue is the fact that mainland retail can’t compete with offshore VAT free prices or even sell on the internet due to the same offshore VAT advantage .”
When you talk about mainland retail not even being able to “sell on the internet” because of “the same offshore VAT advantage” are you referring to downloads? If so, what is the VAT advantage for downloads? I’m sure I have always been charged VAT on my MP3 downloads from Amazon.co.uk. Are there actually any websites offering VAT-free music downloads?
On a related subject, digital retail (mp3) has its own problems. The retailers themselves are often located in odd places, as there is no need to be close to the consumer.
Amazon digital stopped ‘self billing’ record labels from their UK Ltd company a few years ago and combined sterling/euro statements started coming from … you guessed it … Luxembourg. Frankly digital music is likely to end up being not just a VAT problem but a corporation tax one, as digital retailers increasingly shift their profits offshore.
Not really sure what the solution is. After all, if the servers and the sales support staff are off shored, then there is no PE to tax. I suppose ultimately most of the big digital retailers are ultimately part of a on-shore public company, so some sort of reporting would help.
Whether or not it has gon offshore, the fact that business has gone online has at least as much to do with the decline of High Street shopping and the closure of HMV shops. It is much easier to sit at home, browse the larger online stock than any shop can hold, listen to samples and shop around while sitting at home than it is to d the same in a shop.
@Ken I apologise if my comments appear offensive but along with my colleagues in the music industry we are heartily sick of the nonsense that circulates amongst financial pundits regarding the music industry, particularly when the same nonsense is used to excuse a blindingly obvious market distortion that my 11 year old daughter can understand which has destroyed the business (and livelihoods) of those same colleagues. Glad you find it entertaining. Music is not a one size fits all product. Like the term ‘drink’ it covers everything from water, to orange squash to vodka and vintage port. Each drink has its own particular market. Similarly the demand for each type of music varies greatly. Comments such as ,downloads are killing music, and ,supermarkets are destroying record shops, are media cliches trotted out by people who know nothing about the industry other than in terms of share values and investments and what they have heard others say or read. It depends on the music. Yes downloads affect mainstream pop and supermarkets do as well, but I’ve never sold a mainstream pop record in my life and the band I developed sold out the Royal Albert Hall and sold millions of records but very few people on this blog would have heard of them. Of course HMV have problems vs the internet like any retailer but the huge price differential is making online even more attractive. Without the price differential online retail (mail order) has to absorb the postage cost which was the one thing that always increased the cost vs a shop. Why would anyone in their right mind pay £14 for a CD they can get 20% cheaper on the internet ? Just after HMV moved to Guernsey in 2006 they entered into a price war with Play.com. Up to that point Play.com was selling products at prices equal to UK but the postage was free (clearly there would be no point lowering the price and reducing the margin as they had an advantage they could use to provide free postage) HMV decided to price all CDs at 8.99 delivered in a battle to increase market share of their online operation and take market share from Play.com(based on a dealer price of up to around £9 with their file discount of 16%) which then forced Play to follow suit, and Amazon and led to a stampede offshore. It was at this point that Record Shops began to go bust at an alarming rate, because the pricing had fallen within the VAT advantage. The most common question asked of HMV managers was ‘ Why is your website more expensive than the shop’ Of course they could not equalise their shop price with the internet (although they tried to increase their file discount with distributors to equalise the VAT issue in the stores and failed)Its a problem they still have and recently justified it on the basis that ‘Going into a shop is a retail experience ‘ (i.e you have to pay fir it !) I could go on in great detail about the ins and outs of this whole sorry story, but we’ve given all the detail to the EU. This is not happening in other EU States. Its unique to the UK. As for American imports, if you try and import American albums in bulk you’ll get taken to court by the BPI (as happened with Play.com who had to make assurances they would never do it again) and in any case most albums in demand in the UK are not released in America so unless you want the latest Country Star or American Indie band it’s not such a big issue. Downloads attract VAT at the rate applied in the country they are downloaded (the music industry fought and won that battle so no VAT free downloads) So basically if anyone wants to make any comments on this blog about music retail please make sure you know what you are taking about before you post it. Don’t just repeat what you read in some accounting/finance publication. Its rubbish.
@Richard Allen Ken sorry that wasn’t aimed at you. It was aimed at those on here who keep trying to justify the unjustifiable with cliches… I think I answered your query re downloads ?
@Alex I agree but you’ll note no major independent retail brands that survived from the 70s to the 90s are online. That’s because they were not able to move offshore and their own online operations closed. The market distortion is the barrier to online market entry for UK retail. It costs £20 – £30K a year to have an offhsore company structure.
Sorry Richard, but hasn’t your main point always been that CD sales aren’t falling?
Downloads will surely be the majority of the market soon, and therefore the VAT abuse angle will hardly be relevant (for music anyway).
I recommend this just broadcast on 5 Live . Around 50 minutes in. It explores all the issues
http://www.bbc.co.uk/iplayer/console/b00x2v5w/Tony_Livesey_05_01_2011
I recommend this 5 Live just broadcast
http://www.bbc.co.uk/iplayer/console/b00x2v5w/Tony_Livesey_05_01_2011
This isn’t scientific, but if you look for Take That’s new album “Progress” on Amazon (don’t ask why I chose that one!) you get the following:
Amazon.co.uk £8.93
Amazon.fr E14.95 (£12.63)
Amazon.de E13.95 (£11.79)
Amazon.com $19.51 (£12.58)
So why are 3 of them similar and one is very much less? It can’t be anything to do with online versus retail.
I guess if you ask the industry they will blame illegal downloading and copying as the cause of the decline in recorded music sales, as they have been since blank casettes became popular. I guess its not clear if the VAT thing has any impact on overall sales, but personally I would be surprised if it was.
BUT the HMV problems appear to stem from their need to reschedule debt and the problems they are having in doing it. Don’t think this has anything to do with VAT.
@Greg No not at all. My point has always been on the physical sales that exist there’s a market distortion. I’m not so blind as to think that CDs will sell forever . They will never go permanently though. Here’s the evidence :
http://www.phonographcylinders.com/
Brand new phonograph cylinders. No sign of VAT free ones yet though…give it time.
OK I’m bowing out of this debate now..getting repetitive.
Richard.
I believe HMV online are based in Guernsey, so they’ve kind of put the nail in their own coffin.
Its prolly a combination of things, but as usual throwing in the blame of downloaders it must be them pfft. Personally I think the music put out nowadays is crud and I agree with others who say the music industry is killing itself by releasing more crud and incriminating their customers at every chance.
I have seen so many people over the past 10 years saying they will never buy music again. Some reasons relate to things like http://technology.timesonline.co.uk/tol/news/tech_and_web/the_web/article3353387.ece and the bill relating to this that was rushed through parliment. Which was written in part and pushed forward by the big music companies around the world.
Seriously stop pointing fingers e.g its downloaders or its tax evasion or its the vat increase and be realistic this is media we are talking about. Meaning it is a product that has a tiny input a singer in a studio sings a song that song is coppied in a factory a billion times distributed and sold. Now if you look at it from a profit point of view then lets close the shops and distribute straight from the factory using the web as the shop front.
But lets put out masses of missinformation e.g blame downloaders blame tax evaders blah blah blah. When it just makes it alot easyer to sack all those front line staff when you shift the view from music industry profit greed to blaming others.
People seem to forget back in the 80’s pretty much everybody used to tape the charts and the running challenge used to be trying to pause the tape before the dj spoke that didnt destroy the music industry. But the difference then and now is the use of the internet and the fact that these big players dont need shops anymore they have established names and the infrastructure in place.
So again please look at it from a greed profit point of view they control the market already so if its comming out of a shop or a factory they will have a finger in that pie, difference being in the shop you have to pay some sheeple.
Its sad how far people have fallen down the perception ladder of what is happening around them. I just hope for all of our sake people start waking up while there are still some jobs and liberties left and maybe we can turn it around.
Anyhows thats my rant happy new year all
@Doogle You are obviously looking in the wrong place. I’ve bought some great music this year. Musics too expensive ? !! Didn’t it used to be £15 for a CD. Now you can pay £5, less than a download (and two pints of beer). You just sing a song in a studio and like just duplicate it ? Yes and like Supermarkets just grow a bit of food and sell it…and petrols just a bit of drilling and a few pipes… Standards on this blog are falling.
@UK Student Some sense at last. You’ll do well as a student.
@ Richard Allen,
I dont recall saying that the price of music was the issue, re-read my previous post. Friend part of my point was that to create a single/album it can be created in a studio and copied a billion times. Charge £15 or £0.01 makes no difference. You are totaly right supermarkets can just grow some food and sell it, but brother there is a difference. A supermarket can just grow a tomato but can not copy it a billion times and then sell it. I dont disagree that there is some infrastructure inbetween e.g delivery. However the cost of delivery from a factory is put off on the customer. Another point of mine of why high street stores are closing is that internet shop fronts dont need a high street presence anymore. My friend I hope your family is wealthy and doesnt need high street store jobs as if they do your’re going down the same sh*t street us sheeple are e.g no jobs. Again “I just hope for all of our sake people start waking up while there are still some jobs and liberties left and maybe we can turn it around”. And regards to “Standards on this blog are falling.” I dont think it is about standards when these things are a reality to us sheeple, well unless you’re part of the elite then I guess you are correct, standards are dropping as we are speaking out!.
Happy new year to all Doogle out.
@Doogle If you think making money in the music industry is easy then you have no idea what you are talking about. Most people lose money. Its not about the cost of pressing a record its the vast amount of investment that is spent promoting the artist, most of whom fail. Don’t knock the music industry. Its one of the few industries left in the UK that actually makes physical products and supports manufacturing…..Man..