HMV’s strategy of diversification comes to an end

HMV's previous attempt at a strategy of diversification has now ended after it agreed to dispose of its business units involved in live music and entertainment. Lots of evidence in this case study about how risky diversification can be. HMV paid £46m to acquire MAMA Group back in 2010:

At the time, the move into the live music and entertainment market was seen as a key part of a "transformation plan" for HMV. The business has come under pressure from declining physical music and film sales from its high street stores and increasing competition from downloading and internet retailers.

It has also struggled with £136m of debts but was handed a lifeline by suppliers such as Universal Music and Sony who took a 2.5% stake in the company to try and ensure the survival of the last remaining major high street music and film outlet.

HMV report that they have sold their stake in MAMA Group for £7.3m to a private equity group (venture capital). You can do the basic maths on how successful the MAMA Group diversification turned out to be. Bought for £46m; sold for less than £10m. Hmmm

Regularly readers of the Business Studies blog will know that HMV has been undertaking a significant retrenchment in the last couple of years. closing loss-making stores:

http://www.tutor2u.net/blog/index.php/business-studies/comments/hmv-strategy-death-of-a-billion-downloads

http://www.tutor2u.net/blog/index.php/business-studies/comments/what-strategy-should-hmv-employ-next