HMV dying has nothing to do with Amazon's tax avoidance

How do you fight a behemoth which needn't profit?

The death of HMV is undoubtedly due to competition from Amazon in particular and the internet in general. There's a lot of rosy-eyed reminiscing about the chain from people who apparently haven't been in it for a decade or so – it was, in many ways, a terrible shop – but the fact that it represents (represented?) 38 per cent of the entire physical music market suggests that it isn't just dying because it was run badly. There may be something fundamentally untenable about high-street music retail.

(Though that untenability only necessarily applies to chains; it may be the case that independent record shops, like Rough Trade, have something to offer which the internet can't out-compete them on)

But I'm uncomfortable about the meme going round that Amazon only has the advantage it does over HMV because of its tax-avoiding ways.

It's certainly the case that Amazon's, er, tax planning gives it an advantage. For instance, it charges 20 per cent VAT in ebooks, but only returns 3 per cent of it to the Luxembourgish exchequer, taking advantage of the discrepancy in the rates between where it is based and where it carries out its business. And, until the loophole was closed in April last year, Amazon managed to avoid charging any VAT at all on goods below £18 by shipping them from the Channel Islands.

But even without those avoidance strategies, HMV would have found it impossible to compete with Amazon, because it's a company which simply plays a different game from all others.

Amazon's entire strategy to date is to release loss-leader after loss-leader, building its share of the market – and the number of markets it operates in – to astronomical levels, all while promising jam tomorrow.

Take the Kindle owner's lending library. That's a project which offers free access to ebooks for Amazon Prime subscribers – Amazon's flat-rate free next-day-delivery program – who have Kindles. It is clearly a loss leader, aimed to drive Kindle sales and Amazon Prime subscriptions. But both of those are, themselves, loss leaders. Amazon makes no money on its flagship Kindle model, the Paperwhite, and while it doesn't reveal the figures, most analysts agree that it also loses money on Amazon Prime.

The company has revenues of the same magnitude as Apple, but profits at the same magnitude as Games Workshop. It has managed to convince an entire class of investors to give it money and not ask for anything back save continued growth. In short, it's a multi-billion pound company being treated like it's a start-up.

That is something which HMV cannot compete with. Even if online retail didn't have intrinsic advantages over brick-and-mortar – with lower fixed costs, larger potential markets and a near-infinite potential for keeping things in stock – and even if Amazon paid full British tax on everything it does, HMV still couldn't offer prices that matched Amazon's, because HMV has to make a profit on what it sells.

That's not actually a bad thing in the short-term. What Amazon's strategy amounts to in the short-term is a massive transfer of wealth from its investors to its customers — at least compared to the non-Amazon alternative. In the long-term, it must result in one of two things: the bubble bursting, and the company being forced by shareholders to stop sacrificing profit for market share; or a consolidation of its monopoly, allowing it to raise prices because every other potential competitor has been driven out of business. Neither of those outcomes sound as good.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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PMQs review: Jeremy Corbyn hammers David Cameron on green energy – but skips Syria

In a low-key exchange ahead of the Autumn Statement, the Labour leader covered two areas where the government is vulnerable: renewable energy and women's refuges. However, he failed to mention Syria and the Russian plane shot down by Turkey.

When PMQs precedes an Autumn Statement or Budget it is usually a low-key affair, and this one was no different. But perhaps for different reasons than the usual – the opposition pulling its punches to give room for hammering the government on the economy, and the Prime Minister saving big announcements and boasts for his Chancellor.

No, Jeremy Corbyn's decision to hold off on the main issue of the day – air strikes in Syria and the Russian military jet shot down by Turkey – was tactical. He chose to question the government on two areas where it is vulnerable: green energy and women's refuges closing due to cuts. Both topics on which the Tories should be ashamed of their record.

This also allowed him to avoid the subject that is tearing the Middle East – and the Labour party – apart: how to tackle Isis in Syria. Corbyn is seen as soft on defence and has been criticised for being too sympathetic to Russia, so silence on both the subject of air strikes and the Russian plane was his best option.

The only problem with this approach is that the government's most pressing current concern was left to the SNP leader Angus Robertson, who asked the Prime Minister about the dangers of action from the air alone in Syria. A situation that frames Labour as on the fringe of debates about foreign and defence policy. Luckily for Corbyn, this won't really matter as no one pays attention to PMQs pre-Autumn Statement.

Anoosh Chakelian is deputy web editor at the New Statesman.