Bethel Finance: Tower Records, Blockbuster closing Israel stores

www.bethelfinance.com
Technology developments and pirate downloading have hit NMC Music Ltd. (TASE: NMC) hard. Sources inform ''Globes'' that over the past year, NMC has closed 14 Tower Records stores and six branches of the Blockbuster chain, which has completely closed down operations. 200 employees have been fired from the two chains.

Tower Records sells music CD's, recording products, computer games, and computer game consoles. The chain currently has only seven stores, compared with 40 stores that it had at its height. For the moment, these seven stores are profitable. Blockbuster rented and sold movies, and at its height had 40 branches.

Another area in which NMC operates and which has been only slightly downsized, is videomats. The company operates 80 videomat dispensers throughout Israel.

NMC, controlled by Moshe Edri, acquired the two chains at the onset of the market turnaround. It acquired Blockbuster at the end of 2008 and Tower Records in April 2009 as part of the Hed Arzi deal.

Both chains caused NMC heavy losses estimated at more than NIS 40 million. In 2009, it had a loss of NIS 11.5 million. In 2010, losses increased to NIS 21 million, and in the first quarter of 2011 alone, losses reached NIS 3.4 million.

NMC United CEO Pnina Edri attributes the failure of the chains to, "the difficult conditions that the music industry is suffering, and to fraudulent copying and downloading in Israel at unprecedented levels compared with other countries, which harms music disc stores as well as the artists themselves."

Edri also blames, "the law enforcement authorities for not doing enough to stop the phenomenon that is insulting to musicians and investors, and which is basically stealing their art."

Edri continues, "The Tower Records stores that are currently in operation are profitable. We believe in this chain and wish to continue selling music discs."

In an effort to counteract this phenomenon and in cooperation with Walla Communications Ltd. (TASE: WALA), NMC launched Walla Music, which enables surfers to legally download music for a small monthly fee. NMC also recently launched a Wall Music app for androids and iPhones.

Edri believes that the company growth will come from a new office to represent artists in stage performances. NMC launched this service six months ago and is currently representing leading artists and hopes to expand this activity.