HMV is to enter the live music arena by buying a 50 per cent stake in a joint venture with venue operator MAMA Group.

HMV Group, which this week reported like-for-like sales growth of 3 per cent for the five weeks to January 3 at its HMV UK & Ireland music stores, has also bought 14 Zavvi shops from its administrator for£700,000.

The deal with MAMA covers 11 live music and entertainment venues, including the Hammersmith Apollo in London, which will be renamed the HMV Apollo. Other London venues include the Forum and stakes in G-A-Y and Heaven, while venues outside the capital include The Picture House in Edinburgh.

HMV will pay an initial£18.3m, including the 10-year naming rights, for the venture. It has also tied up a deal with a ticketing business, Seatem.

HMV Group chief executive Simon Fox said the live music market is worth about
£1bn annually.

He said: “It allows us to expand our offer into ticketing and live music while driving traffic to”

HMV Group sales rose 2.9 per cent for the five-week period, including like-for-like growth of 0.5 per cent. Waterstone's total sales fell 0.9 per cent, including a like-for-like decline of
2 per cent.

Gross margin is expected to be flat for the full year at both HMV UK & Ireland and Waterstone's.

HMV International's sales fell 3.6 per cent, including a like-for-like sales fall of 6.6 per cent.

The retailer will place up to 20 million new shares to fund the MAMA and Zavvi deals, which together with its£220m bank facility to 2011 will ensure “a strong and prudent balance sheet”.

Fox added: “The physical music market is changing structurally and we need to diversify.”

He said he had the “strong support” of HMV's largest shareholders. “It's a significant opportunity in a relatively low-risk way,” he said.

He denied the deal signalled that HMV believes traditional music retailing is dead, saying HMV sold 7 per cent more albums over the Christmas period than in the previous year.