First store 1921

Leading entertainment retailer in UK – 25% market share in audio and DVD

215 stores in UK & Ireland rising to 230 by Xmas

2004 Sales of £930m and Operating profit of £95m

Core values of range, advice, service and value

Very strong retail platform, operational excellence and consumer brand for entertainment retailing

Background on HMV UK

Challenge to replicate in Digital

How does HMV compete?

Brand LeverageIn-store

advertising

In-store portable

hardware offer

In-store advice

Brand Store integration

Using our stores and educated staff, with a strong technical base and great range.

Critical Success Factors

BrandUser friendly service

CompetitivePrice

Exclusive Content

Store Integration

SERVICE SUCCESS FACTORS

CustomerService back

up

Full Range Service Reliability

SERVICE MUST HAVE’S

Strategic Decision

Seek to develop a la carte and subscription download store

Develop Jukebox digital retail platform (Napster / itunes)

Seek technical partners (as skill set non core to HMV)

In-store MP3/WMA portable player offer with educational element

Longer term in store downloading and service integrated with HMV.co.uk (web based app), mobile play

HMV Digital – Simple and Friendly

Jukebox

Digital Zone

PortableHardware

Jukebox Discs

Subscription Service

Permanent

Downloads

OnlineRadio

HardwareAccessorie

s

Digital

In-Store CU

STO

MER

S

Implementation

Following 6 month due diligence process selected Microsoft and MusicNet to be our partners

Microsoft: front end – build the jukebox

MusicNet – digital warehouse – act as storage and delivery company for digital catalogue

9 month project to launch digital store on 5th September

HMV Digital Platform

Consumer PCLatest released generation for best entertainment experienceWindows XP Service Pack 2Windows Media Player 10‘Janus’ plays for sure devicesClient Application Windows Forms 1.1Looking forwards, upgrade the framework, WPF, WMP11

Service InfrastructureWindows 2003 Server platformASP.net 2.0 web site / web servicesSQL Server 2005ISA Server 2005MOM 2005Integrates with existing WebSphere / DB2 applications via web services

Live / Launch Tasks

Commercial terms with record companies – focus on Indies

Catalogue acquisition and range check

In store execution – new unitary, device manufacturers and education for consumers

Marketing campaign

PR and launch campaign

HMV Digital Store

PERMANENT DOWNLOADS

SUBSCRIPTION

Differentiation on pricing and product

HMV Digital differentiators

PERMANENT DOWNLOADS

sell digital albums AS albums

multiple retail price points

Indie content new to digital

HMV Live

record performances and sell on HMV Digital

In-store Launch

In-store Launch

OXFORD CIRCUS

Results?

Very successful launch with amazing PR

In the market with a stable jukebox developed in only 9 months

Good platform to develop functionality and distribution channels

Developed internal knowledge base of MS technology and integrate with existing systems