Profitable Fnac offers music streaming

Profitable Fnac offers music streaming

Entertainment chain Fnac has found a new life in commercializing music streaming. On top of this new business opportunity, Fnac has managed to become profitable again managing a 2013 net profit of 15 million euro.

Life after death

Fnac had taken losses up to 170 million euro in 2011 and 2012, which meant some analysts believed the chain was basically doomed to perish: the entertainment chain had completely missed the digital age as Amazon pushed its way into Fnac’s core business (books and cd’s) online.

 

The French chain has managed to turn things around and transformed radically to compete with Amazon. Prices dropped and distribution investments meant it could cater its customers faster. It also introduced more expensive articles, which did not get any competition from the internet, like a range of mobile communication appliance and paper goods.

 

It has continued its innovation recently because it will offer a streaming service for a fixed price per month, not unlike Swedish Spotify and French Deezer. There will be two different formulas, with the first giving unlimited access to 200 songs for 2 euro per month, while the second gives unlimited access to millions of songs for 4,99 euro per month.

 

Positive sales evolution

This change in approach seems to be working, as it has managed to overturn the yearly 5 % turnover drop Fnac has experienced these past few years. 2013’s last quarter was the first in three years that it managed to rise once again. Aggressive marketing and promotions helped reach a 0.6 % sales increase, a positive evolution despite the full-year turnover still dropping 3.1 % to 3.9 billion euro.

 

Partly through a social plan, it has also managed to curb its costs: 160 million euro saved since 2012. That has led to a positive cashflow in 2013, for the first time in years. The operational result rose 13 % to 72 million euro, while net profit reached 15 million euro.

 

CEO Bompard remains cautious

CEO Alexandre Bompard remains cautious: “Our markets remain difficult and have shrunk 10 % on average in the past three years. The Christmas period was positive, but the momentum has to continue. “

 

Fnac has been a nuisance for its owner Kering for quite some time, which prompted it to put Fnac up for sale. Every shareholder received Fnac shares and it requested a stock exchange listing for the French company, which helped them to get sell off their securities quickly. Only the Pinault family has held onto 38.9 % of Fnac’s shares through its Artémis holding.

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