HMV's Simon Fox - 2

I think that particularly, below-cost retailing - which supermarkets actively engage in - for new releases is extremely damaging for the industry. 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.

They start competing with each other - which they're doing anyway - and they try to outdo each other with their low cost redemptions. It's ultimately damaging for the industry, and frankly damaging for the High Streets of the country.

Well, if you look at other countries, why is the French High Street so much stronger than the British High Street? One of the reasons is that French supermarkets aren't allowed to sell below cost - so one answer is legislation, but that's highly unlikely to happen in this market... But I do believe that below-cost selling is very damaging, and I think those countries that have legislated actually have a more balanced society and environment.

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.

I agree - this is all about today's short term decisions versus taking a longer term view. 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.

Look, I think one has to ask why supermarkets are shifting large quantities, and is the answer anything other than their price points. I don't think it is - I think they're shifting large quantities because they're selling below cost.

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.

Yes - it's something we have to be very conscious of.