2. 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

3. How does HMV compete? Brand Leverage In-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.

4. Critical Success Factors Brand User friendly service Competitive Price Exclusive Content Store Integration SERVICE SUCCESS FACTORS Customer Service back up Full Range Service Reliability SERVICE MUST HAVE’S

5. 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

6. HMV Digital – Simple and Friendly Jukebox Digital Zone Portable Hardware Jukebox Discs Subscription Service Permanent Downloads Online Radio Hardware Accessories Digital In-Store CUSTOMERS

8. 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 5 th September

9. HMV Digital Platform Consumer PC Latest released generation for best entertainment experience Windows XP Service Pack 2 Windows Media Player 10 ‘Janus’ plays for sure devices Client Application Windows Forms 1.1 Looking forwards, upgrade the framework, WPF, WMP11 Service Infrastructure Windows 2003 Server platform ASP.net 2.0 web site / web services SQL Server 2005 ISA Server 2005 MOM 2005 Integrates with existing WebSphere / DB2 applications via web services

10. 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

13. HMV Digital Store PERMANENT DOWNLOADS SUBSCRIPTION Differentiation on pricing and product

14. HMV Digital differentiators PERMANENT DOWNLOADS sell digital albums AS albums multiple retail price points Indie content new to digital

15. HMV Live record performances and sell on HMV Digital

16. In-store Launch

18. OXFORD CIRCUS

19. 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