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HMV warns publishers: Support us, or risk losing us

CEO Simon Fox predicts demise of specialists if supermarkets continue below-cost selling

HMV UK & Ireland CEO and MD, Simon Fox, has told GamesIndustry.biz that specialist retailers could disappear if supermarkets don't stop selling key titles at below-cost prices - and that more support is needed from publishers to prevent that from happening.

Last year games including FIFA 10 and Call of Duty: Modern Warfare 2 were targeted by the likes of ASDA and Tesco, which offered some titles for as little as £25 - compared to a normal price of around £40.

But while those prices drove large numbers of consumers to take advantage of the offers, speaking in a wide-ranging interview, part two of which is published today, Fox also pointed to other sectors that have already suffered as a result of supermarket monopolies - and warned that the same thing could happen to videogames too.

"I think that particularly, below-cost retailing - which supermarkets actively engage in - for new releases is extremely damaging for the industry," he said. "Firstly it creates massive price deflation, and customers think that if the absolute newest and best product is on sale at £25, why should I pay any more for a less high profile or older product? It immediately puts massive deflation on to the market.

"And secondly, what it will ultimately do - as it's done in other sectors, such as off license - is destroy the High Street specialists. Because they can afford to sell below cost in certain categories, in order to kill of High Street competition, and then either they lose interest in the category altogether - which, I think in music you can probably see that the storm is somewhat passing. But the risk is that they come in, destroy prices and then they lose interest altogether."

Ultimately, he concluded, it's not only damaging for the industry, but most stores on the High Street.

"Evidently, the other thing is that publishers have to recognise that different retailers do have different roles to play, do have different cost structures, do need to make profit from entertainment product - we simply can't afford to sell entertainment product at a loss, because that's all we do - and therefore require support in other ways," he said.

He admitted that he understood why publishers would sell to supermarkets in such quantities, but questioned the wisdom of following that path overall.

"This is all about today's short term decisions versus taking a longer term view," he said. "I fully understand why publishers would sell to supermarkets in great quantities - it's completely understandable. The question really is how the publishers will feel in two or three years' time if their only route to market is either digitally - direct - or via supermarkets.

"Supermarkets will evidently, as soon as they have that power, use it - as they have done in every other industry. The question goes back to: For how long will the supermarkets be prepared to do that? They won't be prepared to do it for very long."

The second part of the interview with Simon Fox, in which he also talks about the future of live gaming and the Gamerbase locations, is available now.

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Phil Elliott