When the last man falls

The shelves are not as packed as they used to be. This is the word of one Musica employee who wishes to remain anonymous. She remembered how this Durban branch used to pack numerous CDs and DVDs onto the shelves around Christmas time.

“Last Christmas was definitely quieter than other years,” she admitted.

Musica, which was bought by Clicks in 1992, has “been operating in a declining market for several years” the group said on Thursday.

According to the annual results released in August 2020, the retail entertainment store has seen a 30.2% decline in turnover from 2019’s figures.

This, in tandem, has led to the group’s decision to close Musica for good from 31 May this year. It is a decision which has not come as a surprise to many.

A new platform

“While I believe that the pandemic would have had a significant impact on the decision to close, it’s been on the cards for a while,” said Alec Abrahams, an equity analyst at Sasfin Wealth.

“Clicks has been closing Musica stores and reducing store sizes for over five years, as the retail category’s sales have succumbed to modern spending trends,” he added.

Subscription-based purchases, which allow the user access to a library of content for a small fee a month, have attracted much of the interest away from store-based product spending according to Abrahams.

The PwC echoes part of this sentiment in declaring that the South African physical recorded music segment is in decline.

Its ‘Africa Entertainment & Media Outlook 2019–2023’ report states recorded revenue stood at R192 million in 2018, a 31% point decline from the total registered in 2017.

However, music streaming is on an upward drive. Digital music streaming revenue reached R325 million in 2018, up almost 57% year on year.

Other stores like Musica began to feel the pain of this shift years before. Look and Listen, for example, filed for business rescue in 2014 according to City Press.

For Abrahams, Musica was able to outlive its competitors by being a part of the Clicks group. He says that the company tried to sell the retail chain but there were no takers.

“They [were] happy to keep running the chain and enjoy the few benefits of being the ‘last man standing’ as long as it doesn’t cost Clicks anything.”

“Clearly, with the lockdown, it started losing serious money and the decision was easy.”

Vinyl sales

Although CD sales have been going out of fashion, stores like Musica have also offered music in the form of vinyl records.

Nhlanhla Sibisi, CEO of Recording Industry of South Africa, said that vinyl records had become popular in South Africa in recent years.

“Current data indicates that vinyl sales have increased 36 % from R3.9 million in 2018 to R5.3 million in 2019,” he said.

However, due to the Covid-19 pandemic, vinyl sales saw a drop to R1.4 million in 2020, a 74% decrease from the previous year.

“Although, Vinyls have become popular lately, the sales of CDs far outweigh vinyls sales. For example, the sale of CDs in 2020 was R21 million compared to R1.4 million for vinyls,” he said.

For Sibisi, the closure of Musica will have a significant impact on the music industry.

He noted that certain music genres, such as jazz, traditional gospel, and Afrikaans music, have not fully migrated to online platforms and will feel the effects of this closure the most.

He also mentioned that some listeners, such as those in rural areas, do not have the data to transition to an online service.

The future for Clicks

“The closure of Musica was a conscious decision taken by the board and management to enable the group to focus on its core health and beauty strategy,” said Vikesh Ramsunder, Clicks CEO.

The closure of Musica is unlikely to affect the Clicks group’s profits significantly says Abrahams.

“On the contrary, it will save some management time to focus on the group’s gems, Clicks and UPD,” he elaborates.

Prior to the closure announcement, items such as headphones could be found in various Clicks stores across the country. Ramsunder confirmed Musica’s closure will not affect the product range offered at Clicks.

A tweet sent out by financial journalist Hilton Tarrant claimed that Musica did launch an online music download store in 2004, but it eventually shut down.

“It clearly knew which way the market was headed but chose not to play aggressively in the digital space,” the tweet read.

When Moneyweb asked Ramsunder about its plans for Musica to transition to the digital space he said: “Musica is a small, heritage brand in the Clicks Group stable and entertainment retail is non-core to the group’s health and beauty strategy, so the company was never planning to make a major investment in tech retail.

“The closure of Musica will enable management to focus entirely on health and beauty,” he concluded.

Michael Brown is a Moneyweb intern.