Entertainment retailer HMV (LSE: HMV) is buying a 50 percent stake in the increasingly well-thought-of UK online music retailer 7Digital for 7.7 million ($12.6 million), in a move that will finally kickstart its digital ambitions.
The deal means HMV Group will use 7Digital as its sole supplier for what it says will be all of its existing digital operations, though the announcement also says its its UK and Canada operations which will benefit from the acquisition. HMV will also use 7Digital to build a new e-books and audiobooks store for its Waterstones subsidiary, a new area for 7Digital.
While physical entertainment sales for many categories other than games and gadgets dipped for HMV, early in 2008 it began trialling GetCloser.com, a social network that would let users share their entertainment libraries, but its gone predictably limp. Its been the conversion of its digital offering to DRM-free MP3 and the addition of web streaming in September, on top of its subscription HMV Jukebox plan, that has started to move downloads for the retailer - Q1 HMV.com sales were up 16 percent from last year while Waterstones.com, which has an exclusive deal to push e-books to Sonys E-reader, was up 60 percent.
After we saw how the collapse of retailer Woolworths’ physical and online entertainment distributor Entertainment UK and of Nokia’s closure of its OD2 killed off many European white-label download operations, HMV is mitigating against losing its increasingly important digital distribution channel.
By Robert Andrews