Bad Music Retail News From Napster, Musicland And HMV

The week has begun with a plethora of bad news from across the music retail sector. Digital Music News is reporting that download pioneer Napster is in such dire straights that massive layoffs and even a fire sale of assets are being considered.  More should be reveled at an investor conference call on February 8th (Stay tuned for details on how to listen in.) Napster shares presently stand at $3.27, down $6.57 from its 52-week high.

Hypebot will be digging deeper for the story behind the Napster slide from grace. but three things seem apparent. First as a stand alone company without the backing of  for example Yahoo! (Yahoo! Music) or AOL or being a more established and diverse company like Real (Rhapsody), Napster may not have the resources to wait out the slower than predicted growth in downloading caused by the current dominance of iTunes and it’s proprietary system.  Secondly, Napster has done little to set itself apart form other competitors. Lastly, a shake-out of weaker or less innovative players is inevitable in an new business sector and should not be viewed as a sign of overall weakness.

In the physical retail space, the 800 store Musicland chain has filed for Chapter 11 bankruptcy protection while it undergoes a restructuring.  And the head of large UK based music chain HMV has resigned in part blaming lower than projected Christmas sales and admitting that he had misjudged the impact of downloading on CD sales.  Less sited but just as important as the move to digital is the increasing competition on music retailers form big box stores like Walmart and Best Buy.