HMV’s poor trading update for the crucial Christmas period was due to the decline in demand for CDs, DVDs and games, and competition from supermarkets and e-tailers, compounded by bad weather

Waterstone’s outperformed HMV as the challenges of high street book retailing are not (yet) as acute as for CDs and DVDs – we consider it possible that HMV will divest the chain

HMV’s strategy for the store network is a key challenge for 2011 – in addition to planned store closures, further closures may be needed to maintain current profitability

Smartphones are rapidly moving to become a majority of UK mobile handset sales, driving a surge in mobile internet use. Even if usage per user (currently growing) flattens out, we forecast mobile internet usage to grow from 1.8bn hours in 2010 to 7bn in 2015: 28% of total online time

This should drive the long promised growth in mobile advertising and we project UK spend, including search and display, will rise to £420 million by 2015, equivalent to 10% of PC internet search/display advertising

We expect the majority of this usage to be incremental to PC-based consumption, as users find new things to do and buy on the mobile web, driving the overall online advertising market to further growth

By 2015 we expect internet-centric smartphone penetration in the UK to reach 75% and mobile internet use to reach 28% of total time spent online. The dynamics and ecosystems of the mobile internet, and in particular the app model, will become a significant part of overall digital strategies

First seen as an interim reaction to slow networks and small screens, mobile apps have become a major new route to market for publishers and ecommerce providers, and are likely to spread to new areas

However, Apple is likely to continue to lose share in the internet-centric smartphone market, and publishers will face a far messier, fragmented world of competing platforms, app stores and payment systems