In 2004 HMV complained to the Treasury about the impact of competition on CD and DVD shipments being artificially routed through the Channel Islands to avoid VAT.
Eight years later HMV is a wreck of a company and the High Street has been denuded of record shops.
Which makes it all the more important that the warning from Andy Street of John Lewis is noticed now: offshore has the power to destroy much of our economy.
We can choose to stop it. But we have to do so now.
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I am sure the CI VAT issue did not help, but I think you will find that the High Street is denuded of record shops because of downloads.
In my opinion, HMV is struggling to re-invent itself and doing a very good job of it. However, it should have been doing this in 2004. It was obvious the way entertainment was going.
Always the excuse even when the evidence simply does not support you
Downloads did not replace hard sales during this period
Nobody has any idea of the level of illegal downloads that have taken place over the last 10 years, but what is clear is it far outstrips both legal downloads and CD sales by many multiples.
Whilst I don’t agree with the exploitation of the minimum consignment relief, I don’t think banning it would have stopped the destruction of HMV.
But legal sales did not decline on CD and DVD as most glibly claim
That’s the point
RAVAS have shown this
Rubbish. Virtually every PC or laptop sold in the past 6-8 years had come with at least a CD writer. It takes a couple of minutes and costs very little to do an “identical” copy of a CD (more latterly a DVD). Better still to simply download it to the hard drive for free. Even before that Minidiscs offered CD quality (and better) digital transfer for a pretty low price. It is a classic repeat of the 1970s/80s “Home taping is killing music”. CD as a format is almost dead. DVD as a format is close behind due to internet tv. HMV should have reacted and diversified years ago instead of complaining about the situation. I hope they haev not left it too late.
With regard to LVCR on DVDs, that is still the problem. DVDs are much cheaper and new releases are released earlier from the USA, and LVCR still exists on imports of those. So guess where many people shop for DVDs now?
Perhaps next you will now blame LVCR from the channel islands for the dramatic drop in book sales?
Since you’re dedicated to wasting my time with evidence free comment please don’t bother again
Downloading has gone up 10 times in the last five years.
There is also another factor in the lack of sales which is piracy/sharing…a big problem. In the first half of 2012 there were approximately 40m albums/singles illegally shared (source: BPI). In 2011 113m albums were sold.
In 2011 in the UK, downloads were 24% of the market and cd physicall sales 75%.
Prcisely re the latter – not enough to have the impact on the High St that happened because of LVCR
The latter does not take account of illegal downloads, nor do RAVAS, because nobody has any idea the level of illegal downloading which goes on. They can estimate, but they simply do not know.
Ignoring the morality of it, it is human nature to choose to get something for free rather than pay for it, therefore more people will be downloading free music than paying for it via legal downloads or purchasing cd’s. This is why artists now try and earn their money through other means and why the record companies try to take a percentage of the artist’s other earnings, because they are well aware of the sheer volume of illegal downloads.
You ignore the fact that the physical trade still exists
Why?
Is it you want to ignore illegality
It sounds like it
Attributing the historic VAT dodge from the CI’s to HMV and record shops demise is over simplifying this completely and ignoring these businesses are/were pursuing a business model destined to fail if not adapted.
It is true CI internet companies (e.g. Play) used to have an advantage over traditional high street retailers both in terms of VAT, but also overheads- but it’s not clear cut by any measure.
Many items sold by the likes of Play (e.g. Boxsets, New releases) were over the £18 (now £15) threshold and thus did not have a VAT advantage. Anyone with an once of business acumen would adapt the high street business model to shift the lines of greater value (thus avoid competiton), and those of high service (which email customer service cannot provide). The likes of MVC, Zavvi and no doubt HMV at some point have failed to adapt and continue along a path of uncompetitive pricing, low value ranges, and poor to moderate customer service. This cannot be blamed on offshore tax avoidance, only poor business leadership.
Whilst it is true physical DVD and CD purchases rose in small terms, the pattern of consumer spending in this period changed dramatically:
-Supermarkets often sold DVD and CD lines as loss leaders
-Consumer Spending shifted increasingly towards internet consumption
-Illegal and legal downloads began to become increasingly popular
-Increasing rates, charges, and rent bore increasingly on high street retailers. Trying to pass these costs on against a loss-leader supermarket, or even an internet based seller paying VAT with 10% of the overheads is doomed to fail in the long run.
It simply isn’t as black and white to blame their demise on LVCR. It is however very clear to blame the devastating loss on these businesses on terrible management and excessive rates and rents bourne by high street retailers
And respectfully, whilst of course some were badly managed that’s not true of a whole sector
Your argument does not stack
This is the old chestnut that every free dowmload represents a lost sale.
It’s not offshore, its the internet. If you don’t believe me, come to Jersey, stand in the post office collection point and look at the stuff being collected that has been sent by Amazon, Boden and even John Lewis itself. That’s not being bought because of some tax ruse but because physical retailers can’t compete with online in terms of range of products or overheads. The reality is that retail will become a niche activity and the idea of browsing CDs in a packed shop during lunchtime is less attractive to most people than browsing a website from their desk.