HMV was our top entertainment retailer. Now it's Amazon.
As technologies change, so does the way we do business. And if we want an example of that, it's hard to think of a better one than the battle between HMV (LSE: HMV) and Amazon (NASDAQ: AMZN.US) in the UK.
HMV, with its 'record shop' business model, in which people amble into its stores and peruse the week's gramophone releases, has been painfully slow to latch on to the internet. It was spectacularly tardy in realising that the physical discs don't really matter, and that the sounds and images hidden within can be sent easily down wires.
Amazon, meanwhile, hit the ground running and pretty much defined internet shopping. Sure, it started out shipping physical products by mail, but it pretty soon moved into selling MP3 music, video and eBooks via download. Where HMV is all about having to make an effort, Amazon is all about convenience.
Winner and loser
And we know the result. Amazon is making money hand over fist and has grown to command a market capitalisation of more than $80bn. Meanwhile, HMV shares have slumped to 5p, and the once-mighty company commands a market cap of just £23m. Amazon is worth 2,000 times as much as HMV!
It may come as a surprise, then, to learn that until recently, HMV was still the UK's largest entertainment retailer. Now that crown has been taken by, yes, you've guessed it, Amazon.
According to figures from Kandar Worldpanel, in the 12 weeks to December 2011, Amazon took a 22.4% slice of the music, video and games pie, ahead of HMV on 17.5%. The equivalent quarter of 2010 saw HMV still ahead with 19.6%, against Amazon's 19.4%.
Where do we go from here?
HMV is belatedly catching up with the internet revolution, and has launched its own video streaming service. But there it competes with the market leaders, including Amazon's own LoveFilm and Apple's (NASDAQ: AAPL.US) iTunes. Beating Amazon at its own game? That's going to be hard, given Amazon's great track record of customer satisfaction.
There's even a chance that Amazon will one day move into HMV's old-fashioned core market, as rumours abound that the giant will open its first bricks and mortar store in Seattle.
Not that Amazon has things all its own way, mind. It has just lost LoveFilm head Simon Calver to struggling Mothercare (LSE: MTC), where he will become the new chief executive.
Who will still be in this market in five or 10 years time? Amazon for sure. HMV? That's harder to call. But if it is then it will be predominantly online, whether by its own initiative or dragged screaming.
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