HMV will buy a 50 per cent stake in a digital media company to bolster its presence in the growing online music and books market.
The company, which also owns Waterstone’s, the book retailer, paid £7.7 million for the stake in 7digital. Simon Fox, chief executive, said the company decided to make the investment after the Government’s move to combat illegal internet file sharing.
7digital will become the sole supplier of digital content for HMV and Waterstone’s. The company boasts a catalogue of more than 6 million music tracks, as well as providing the platform that allows record labels and artists to sell music on their websites.
It also supplies Spotify, the internet operation that allows users to stream millions of songs free, and Lastfm, the music recommendation website, which provides the technology behind Universal Music Group’s Lost Tunes website that lets users find rare songs and albums.
Mr Fox said: “The appeal is much more about the technology and the people than about the catalogue. 7digital is a really fantastic technology platform. We believe that as the Government is tackling the issue of illegal downloads, now is the time to invest in building up legal downloads.”
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The move is part of Mr Fox’s wider strategy of diversifying HMV so that it is less reliant on CD and DVD sales and instead becomes an all-round entertainment specialist. In a similar deal this year, HMV bought a 50 per cent stake in Mama, Britain’s second-largest live concert venue.
Increasing internet sales, both via digital formats and CDs, was one of the objectives Mr Fox set three years ago when he joined HMV, which reported slightly better than expected sales figures for the 18 weeks to August 31 before the annual meeting yesterday. Sales rose 12.5 per cent, while like-for-like sales were up 1.7 per cent. Waterstone’s sales fell 3.4 per cent on a comparable basis.
Weak points were computer games, suffering from a lack of new releases and the performance in Canada. International like-for-like sales fell 12.6 per cent, despite gains in Hong Kong and Singapore. The shares fell 3¼p to 111½p.