The Wholesale Forums

[Anthony]

Branson sells Virgin music stores

Sir Richard Branson has sold his UK chain of Virgin record stores to a group of senior staff at the business.

The deal, whose value has not been disclosed, will see Virgin's 125 UK and Irish Megastores rebranded as Zavvi.

The business will continue to be run by the current management team headed by managing director Simon Douglas.

High Street music retailers have been fighting for their survival as CD sales have been dramatically supplanted by digital music downloads.

Read more: http://news.bbc.co.uk/1/hi/business/6998606.stm

It seems Sir Richard is confident that the high street scene is no longer his market of interest. This is a prime example of a business moving with the market, not being left behind in the fumes.

Zavvi will certainly be an interesting brand image......

[greedyboy]

To be honest who in their right mind would buy this business? Other than the brand, the business is dead (hence Richold sold it). High street CD/DVD/Music/Book sales are in very serious decline, for very obvious reasons.... the internet and supermarkets have changed the face of music retailing.

There are profit continous profit warnings and companies ceasing trading in this sector.

Good luck! (They will need it!).

[Anthony]

Originally Posted by greedyboy

To be honest who in their right mind would buy this business? Other than the brand, the business is dead (hence Richold sold it). High street CD/DVD/Music/Book sales are in very serious decline, for very obvious reasons.... the internet and supermarkets have changed the face of music retailing.

There are profit continous profit warnings and companies ceasing trading in this sector.

Good luck! (They will need it!).

I had the same thoughts. I think the reasoning behind it is just to take more of the market share. I believe the company taking over already has a position in the market and with this buyout they can build that share. As you say though I can't really understand why somebody would want to invest in this market, sure there is money in it but 5-10 years down the line (if not sooner) that money will have seriously dried up.

What I wonder is why Branson didn't move Virgin Music with the times and ride the download wave. Agreed iTunes has the market nailed but with the brand Virgin have established the UK market could certainly be exploited imo.

[FiveStarWholesale]

Originally Posted by greedyboy

To be honest who in their right mind would buy this business? Other than the brand, the business is dead (hence Richold sold it). High street CD/DVD/Music/Book sales are in very serious decline, for very obvious reasons.... the internet and supermarkets have changed the face of music retailing.

There are profit continous profit warnings and companies ceasing trading in this sector.

Good luck! (They will need it!).

Spot on! This business has been losing money for years and only broke even this year due to a large amount of capital investment.

I'd wager a bet that this business will hit the wall in a year maximum

I'd be interested to know how much they paid for it, if anything.

[Anthony]

It's interesting that Branson has a knack of selling off businesses at the right time. Did anybody see that the media group SMG are ready to offload Virgin Radio for a figure of around 80 million? Just three years ago they paid £225 million for the company. Full article here.

I wouldn't mind betting that this is exactly where Virgin Music will end up. Especially if the basic business concepts of the organisation aren't changed from the currently in decline direction.

[MustHaveMobiles]

Watch for the direction change at Zavvi, the ndustry sites are awash with speculation..

[greedyboy]

Originally Posted by Anthony

It's interesting that Branson has a knack of selling off businesses at the right time. Did anybody see that the media group SMG are ready to offload Virgin Radio for a figure of around 80 million? Just three years ago they paid £225 million for the company. Full article here.

I wouldn't mind betting that this is exactly where Virgin Music will end up. Especially if the basic business concepts of the organisation aren't changed from the currently in decline direction.

I thought SMG bought Virgin Radio from Chris Evans' Ginger Group and Chris originally bought Virgin Radio from Virgin. I am sure RB only had a very small stake in the original Virgin as with many of his 'off shoot' businesses that use the brand 'Virgin'.

Incidently I imagine the Magastore business was sold for very little as it obviously does not include the Virgin brand name (the only thing worth anything).

Two years ago the Megastore business made a loss £200M in only two years.

[FiveStarWholesale]

[quote=greedyboy;119479]Incidently I imagine the Magastore business was sold for very little as it obviously does not include the Virgin brand name (the only thing worth anything).

[quote]

It wouldn't suprise me if it was a '£1 Deal'. Although the business will have alot of stock it is also saddled with expensive leases on High Street shops. And as Greedyboys says, without the Virgin brand it's worthless.

They are going to have to build a whole new brand very quickly in a highly competitive and mature market. I'd say the only winners here are HMV

[greedyboy]

I'd say the only winners here are HMV

They are in the same boat. Unless they radically review their business/stratagy they will go the same way!

Maybe Virgin's new owners have them in their sights to consolidate the market. That's the only option for high street music retailing.

[FiveStarWholesale]

The reason I'd say it's good news for HMV is that I'd imagine alot of Virgin customers will switch to HMV after the rebranding unless it's very good.

In terms of long term benifit for HMV it won't make a blind bit of difference. They are are heading towards the wall, even with the changes they have made/are making. In a few years we won't have a national chain of music sellers. The market will be dominated by online companies and the Supermarkets, which I think is a shame, but that's business!