Fopp free in the future?

Something good in the collapse of HMV: It looks like Fopp might be set free to live an independent life once more.

HMV to be given support by other stumbling, failing giants?

The BBC Business News on Today was just reporting that "record companies" were going to try and keep HMV afloat.

The image is one of the drunk in the back seat leaning over to try and help the drunk in the front seat steer a bit better.

Obviously, the labels aren't talking about giving HMV money - only a crazy person would do that. This weekend's Observer had asked HMV investors about the possibility of them protecting their investment by pumping in more cash, and got this response:

One shareholder said: "It is questionable whether HMV has a business model that is sustainable, and we would need some convincing to support a cash call." Another investor said: "Everyone is asking the same question: 'Would we be prepared to throw good money after bad?'. Fox would have to undertake the mother of all charm offensives to persuade the City a rights issue was a runner."

Even George Osborne, who appears to understand finance less than anyone else over the age of sixteen, has kicked the sickly body round a bit:

"An industry has sprung up and it has quite an impact on high street music stores and I think that is unfair," he said. Quite right. Sue MacGregor, the BBC broadcaster chairing the conference, then remarked: "But it is too late to save HMV, though, perhaps?" The chancellor replied: "Unfortunately that is the case."

Curious, though, that Osborne thinks that his tax changes to try and close the tax loophole which allows Amazon and others to sell CDs without paying VAT if they ship them from the Channel Islands won't help HMV. So was this a move designed to help the already not-that-disadvantaged supermarkets, the only other companies flogging this sort of item in any numbers? Or, as we suggested at the time, does Osborne know the mild change to the cut-off point where VAT kicks in on imports is a pointless piece of gesture politics that makes no difference at all?

So, the record labels are going to "help" HMV, but they're just talking about changing the terms of supply for CDs. Not cheaper, just longer repayment times. Because HMV needs a bit more debt on its books. A bit more on sale or return.

These ideas seem to be bubbling up from people who haven't set foot in an HMV since the mid-1980s. It would be like trying to prop up a greengrocers by focusing on the supply of the draft vinegar. HMV isn't really selling that many records at all right now, having shunted those embarrassing old things to a corner to make room for DVDs, t-shirts, games and god knows what other vaguely-entertainment themed products they've loaded in over the last few weeks.

And HMV is drowning in the debt from its rush to buy cinemas and venues and - did I dream the HMV Camera Obscura? I think I probably did, but can't be sure. HMV's ill-funded dash into everything but CDs shows that even a company grabbing at anything doesn't see escape there. It seems unlikely that making it a bit easier for them to stock a product they don't really want to sell is going to turn the company round.

Although it might be good news for their Fopp stores.

Gennaro Castaldo Watch: He's also a bit of a Fopp

Since HMV snapped up a few Fopp stores, and the brand, Gennaro's empire extends to that chain, too, and he's on hand to outline HMV's cautious expansion plans:

Castaldo also revealed future plans for Fopp stores, of which there are two in Glasgow and one in Edinburgh.

"Just recently we opened a new Fopp store in Bristol, a city where Fopp had operated successfully in the past.

"As and when the appropriate sites in the appropriate locations become available we will consider opening new Fopp branches.

"We don't want to have a rapid expansion plan only to have it all fall down again.We would rather allow an organic growth to take place.

"That is how Fopp grew initially and became successful," he added.

The big idea, though, is - yes, really - digital download booths:

Gennaro Castaldo said: "We are looking to stay true to the original spirit of Fopp, but also keen to attract new customers.

"We are particularly mindful of what Fopp customers want and demand.

"If they tell us they would like to see download kiosks in stores then that would be something we would definitely consider for the future."

These were non-starters when they were competing with staying at home and downloading music; now that more and more people are able to download music onto their handhelds and mobiles while on the move, it's even harder to see why anyone would want to go to a shop to download music onto "a memory stick, which they can then transfer to a PC, mobile phone or MP3 player".

The Scotsman On Sunday adds:

The HMV Group hopes in the future to be able to provide facilities which would allow people to download music and films directly on to MP3 players.

There already is facilities to allow that to happen. It's called wi-fi. It's great to see HMV investing in Fopp, but why would they waste money building in obsolete technology?

Fopp still missing from London?

The new, HMV-owned Fopp microchain is set to reopen at the end of the week - but, apparently, without a branch in London. The purchase of the Covent Garden store isn't running as smoothly as those of the other five stores HMV has taken control of, so London is going to have to wait.

A seventh Fopp, in Byres Road, Glasgow, has been added to the HMV portfolio; this, too, will reopen later.

Gennaro Castaldo watch: Now he's a Fopp

Surveying his new, expanded kingdom, Gennaro Castaldo welcomes the formal transfer of Fopp into the HMV family. (And it is a family. A dysfunctional one with two members of life support already, but a family nevertheless):

"Those stores actually were profitable and the Fopp brand - there's a lot of customer interest in it, it was very appealing, and I think it was working strongly across the country, but some stores were purchased and maybe didn't fit in with the original plans."

"Where those members of staff are available we'll certainly be looking to rehire them which hopefully will mean up to 70 jobs are saved."

As some commenters have pointed out, HMV are by no means picking up all the profitable links in the Fopp chanin, which suggests that the company simply couldn't extend itself to take on any more - you can see they might want to have avoided the MusicZone and MVC branches that dragged down Fopp in the first place, but there must have been some other branches which the people currently keeping HMV afloat wouldn't extend on.

HMV take Fopp

We've just heard that HMV have bought the Fopp brand and a few - though nothing approaching most - of the stores. Music Week is reporting HMV intends to keep Fopp as a stand-alone brand:

The move will also save up to 70 of the 700 jobs that were lost when Fopp went into administration at the start of July.

The stores are located in:
• Cambridge - 37 Sydney Street
• Edinburgh - 3/15 Rose Street
• Glasgow - 19 Union Street
• London, Covent Garden - 1 Earlham Street
• Manchester - 19 Brown Street
• Nottingham - The Frontage, Queen Street

It's not clear why HMV - who are having troubles themselves - think they'll be able to do any better than Fopp's own management, although the strict pruning of the chain to a handful of shops hints HMV might believe over-extension to be Fopp's key problem.

At the same time, HMV has offloaded its Japanese interests - including hmv.co.jp and 62 shops - to DSM Investments Catorce.

Bookmarks: Some stuff to read on the internet

Dave Haslam shows the LA Times around Manchester:

Because of its head start in the Industrial Revolution, its access to Lancashire farmland and its train lines and canals to Liverpool's port, Manchester long ago became an indie city.

"Within the first decades of the nineteenth century," Haslam writes, "the city's merchants had worldwide contacts, with no dependency on the largesse of London. They had created their own wealth, become economically self-sufficient....

"In the era of rock & roll this would be just as crucial as in the days of cotton and coal."

The closure of Fopp sees Scottish musicians delivering eulogies in The Sunday Herald:

"It was great for vinyl," said Aidan Moffat, formerly of Arab Strap. "I remember I bought the first Belle And Sebastian album in there before I'd even moved to Glasgow.

"If I was bored during the day I'd have a wander in. And every time I would come out £30 poorer."

Famous for no-nonsense rounded prices, Fopp was "a bit of an anomaly", according to Moffat. "They started out as this indie shop where you could get bargains, but as they expanded they became something else, because they had to compete with the HMVs of this world.

"I think there's still a place for wee independent record shops, but in the end, that wasn't what Fopp was."

The Future Of Music shares Gerd Leonhard’s Open Letter to the Independent Music Industry:

Today, we have the paradox situation that any startup that wants to use music will not even try to go legal right from the beginning, since there is no reasonable way of doing so. Look at the biggest exits in this turf, during the past 2 years: myspace, youtube, last.fm – either they did not bother with proper music licenses, or it was unclear if and where and when they would even need one. Non-compliance succeeded and was handsomely rewarded.

The music industry must admit that it has failed to act. Their leaders’ clueless-ness, incomprehension and general lack of willingness to embrace true change allowed the paying for music to become voluntary. Congrats.

Don Tapscott points at the year 2006: the losers built digital music stores, and the winners built vibrant communities based on music. The losers built walled gardens while the winners built public squares. The losers were busy guarding their intellectual property while the winners were busy getting everyone’s attention. Warner Music Group’s stock nose-dived from $30 to $14 in less than one year; Google rose from $323 to $526, Apple went from $50 to $127.

Bookmarks: Some stuff to read on the internet

Dave Haslam shows the LA Times around Manchester:

Because of its head start in the Industrial Revolution, its access to Lancashire farmland and its train lines and canals to Liverpool's port, Manchester long ago became an indie city.

"Within the first decades of the nineteenth century," Haslam writes, "the city's merchants had worldwide contacts, with no dependency on the largesse of London. They had created their own wealth, become economically self-sufficient....

"In the era of rock & roll this would be just as crucial as in the days of cotton and coal."

The closure of Fopp sees Scottish musicians delivering eulogies in The Sunday Herald:

"It was great for vinyl," said Aidan Moffat, formerly of Arab Strap. "I remember I bought the first Belle And Sebastian album in there before I'd even moved to Glasgow.

"If I was bored during the day I'd have a wander in. And every time I would come out £30 poorer."

Famous for no-nonsense rounded prices, Fopp was "a bit of an anomaly", according to Moffat. "They started out as this indie shop where you could get bargains, but as they expanded they became something else, because they had to compete with the HMVs of this world.

"I think there's still a place for wee independent record shops, but in the end, that wasn't what Fopp was."

The Future Of Music shares Gerd Leonhard’s Open Letter to the Independent Music Industry:

Today, we have the paradox situation that any startup that wants to use music will not even try to go legal right from the beginning, since there is no reasonable way of doing so. Look at the biggest exits in this turf, during the past 2 years: myspace, youtube, last.fm – either they did not bother with proper music licenses, or it was unclear if and where and when they would even need one. Non-compliance succeeded and was handsomely rewarded.

The music industry must admit that it has failed to act. Their leaders’ clueless-ness, incomprehension and general lack of willingness to embrace true change allowed the paying for music to become voluntary. Congrats.

Don Tapscott points at the year 2006: the losers built digital music stores, and the winners built vibrant communities based on music. The losers built walled gardens while the winners built public squares. The losers were busy guarding their intellectual property while the winners were busy getting everyone’s attention. Warner Music Group’s stock nose-dived from $30 to $14 in less than one year; Google rose from $323 to $526, Apple went from $50 to $127.

Virgin tried to save Fopp

There had been some last-minute attempts to save Fopp from closure, the most notable of which was a proposed merger with Virgin Megastores. The deal fell through because the figures "didn't add up" and Fopp's suppliers weren't keen to embrace dealing with a Virgin-Fopp force.

Of course, Virgin's track record of running a smaller chain, one more enthusiastic about retailing music, alongside its main business isn't great - Our Price went from cool-for-a-chain, to couldn't-care-less, before turning into V-Shops and disappearing completely.

Even more surprisingly, Virgin had also had talks about a link-up with fellow struggling high street musical chain HMV.

Fopp issued a statement marking their closure:

"It is with great regret that we announce the closure of Fopp. Our store chain is profitable, well regarded and loved by our loyal customers and staff.

"However we have failed to gain the necessary support from major stakeholders, suppliers and their credit insurers to generate sufficient working capital to run our expanding business."

Fopp for the chop?

Fopp, which had been the one bright spot on high street musical retailing, has got into difficulties and - having had its branches shut down for "stocktaking" last week - have warned staff not to expect any pay this month as they battle to avoid administration:

A spokeswoman for Ernst & Young said: “We have been brought in to discuss the options with the management.”

She added that they involved administration, receivership or insolvency but cautioned that Mr Dempster had not yet been officially appointed by the court.

Dermot Power, of Ernst & Young rival BDO Stoy Hayward, said that, although HBOS, the banker to Fopp, and trade creditors had been “incredibly supportive”, administration was likely.

“BDO looked to create a restructuring without resorting to insolvency but we could not make it work,” he said.

Gordon Montgomery, the chairman and major shareholder of Fopp, who founded the chain from a market stall in Glasgow in the early 1980s, admitted last weekend that sales were falling. “We are experiencing difficulties. However, I can categorically state we will not go into administration.”

It looks like Fopp's expansion over the last year or so has thrown the company completely off kilter: in February it trebled its outlets at a stroke by buying most of Music Zone's stores; in January 2006 it had taken over branches of the defunct MVC.

At the moment, stores are trading but on a strict "cash only" basis. The website isn't taking any business.

Fopp buys upwards

Fopp Records has more-than-trebled its size overnight, by buying up the best of the Music Zone stores.

Music Zone went into receivership in January, just twelve months after buying up 41 MVC stores. They'd been in receivership since December 2005, in turn just four months after Woolworths had offloaded the chain. The inability of so many management teams to turn a profit from the locations doesn't seem to have phased Fopp.

There had been 35 Fopp stores; now, there are to be 102. For a while, at least.