HMV Group is entering the live music business in a joint venture with MAMA, Britain’s second-biggest concert venue-owner.

The 50/50 joint venture is to be funded by a share placement worth up to 5 per cent of the music chain, which is expected to raise around £20 million, the group said in a surprise announcement last. The new company will operate 11 venues. The deal will also mean the famous Hammersmith Apollo becomes the HMV Apollo.

HMV, faced with haemorrhaging income to illegal downloads and online streaming technology amid a consumer downturn, was tempted into the market by live music’s strong sales growth.

Simon Fox, chief executive of HMV, said: “The live music market is booming, despite these though times.”

He added: “The physical music market is changing structurally, and we need to diversify. Live music is an important and growing part of the UK music market and...it also delivers a younger demographic to our brand”.

The market is worth an estimated £1 billion a year, Mr Fox said. Record companies, faced with a similar online challenge to music retailers, have also sought to enter the live music market.

In 2007, Madonna left her record company in favour Live Nation, the concert promoter and venue owner, in what was interpreted as a landmark step. Record companies are increasingly signing artists on “360 degree” deals that include performance and merchandise revenue.

Mr Fox said the move has been well-received by HMV’s largest shareholders. “This isn’t something we’ve entered into lightly. We’ve been considering this for quite some time. We’re through peak trading with a solid performance, we’re happy with how we are performing and we think that the time is about right”, he said.

“We could have financed it through debt, but we felt the time was right to do a small equity investment. We thought this was a good story for our shareholders and that’s been confirmed by pre-marketing.”

The joint venture will be run by MAMA’s existing management. Dean James, co-chief of MAMA, said: “This gives us a huge platform for future growth of the venue business.”

Mr James said he had no reservation about renaming “iconic” venues like the Hammersmith Apollo. “HMV is a great music brand. If it had been a telephone company, I’d have said ‘forget it’”.

MAMA hopes HMV’s distribution and marketing capabilities will allow it to attract the best artists. Asked if it could lead to an outright acquisition of MAMA by HMV, he said: “That was specifically discussed and rejected by us.”

HMV was also unwilling to take on MAMA’s artist management business as it was considered outside the retailer’s expertise, it is understood. MAMA also has a consumer division, which publishes The Fly, a free music magazine, and provides music marketing.

HMV also reported its Christmas trading performance. Group sales, including Waterstone’s, the book chain, were up 2.9 per cent or 0.5 per cent like-for-like for the five weeks to January 3. Sales at HMV rose 3 per cent like-for-like in the Britain and the Republic of Ireland. Waterstone’s remained the weak link, however, with like-for-like sales declining by 2 per cent.

Mr Fox said he was hoping to pick up the approximate 20 per cent of music sales and 15 per cent of DVD sales left by the failure collapses of Zavvi and Woolworths.

HMV also announced that it had acquired 14 former Zavvi stores, five of them in the Republic of Ireland, saving some 270 jobs.

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