Is this HMV’s last Christmas on the streets?
It really seems as if we’re finally seeing an end-game of sorts for the giant music and entertainment retail chain. Last week’s news that HMV is again facing big losses and may well be unable to meet its loan commitments …
It really seems as if we’re finally seeing an end-game of sorts for the giant music and entertainment retail chain. Last week’s news that HMV is again facing big losses and may well be unable to meet its loan commitments in January caused its share price to dramatically collapse. That this news comes at the busiest time of year for a chain like HMV demonstrates just how bad things are in the bricks-and-mortar entertainment retail sector. Not even banning your employees from showing off their tattoos is going to save you now. The old days are well and truly over.
HMV, the old days (photo via Voices Of East Anglia)
This, of course, is not a new story. We’ve seen HMV lurch from crisis to crisis over the last few years, all caused by changing consumer habits and a knock-on slump in sales. Like many other retailers, HMV have tried to be all things to all consumers and have started to sell anything which might turn a profit. And like many other retailers have found out, HMV have discovered that such width and depth does not work any more, not when customers have access to a much better retail offering online and certainly not in an age of niche.
If this is bad news for HMV’s hundreds of employees, it’s also very bad news for record labels, film companies and other suppliers who have become heavy realiant on HMV to provide them with a High Street showcase for their wares. At a time when other retailers are closing and when there’s significant price pressure from the supermarkets and online retailers, HMV has become something of a beacon for the sector. As a result, the labels and suppliers have been a lot more tolerant of and benevolent towards HMV than might otherwise be the case. It’s only this forbearance and patience which has kept HMV open and trading – indeed, the company handed equity to suppliers in early 2012 in return for better commercial terms. No wonder the labels and suppliers want to see the company survive and have supplied £40 million of support in the run-up to Christmas – it’s in their interest to keep the chain alive.
But the customers have spoken and yet again, we’re seeing labels and co not listening to what they have to say. Customers have moved elsewhere to purchase their entertainment goods. They’re going to online stores or specialist stores to get the goods they may once have purchased in HMV. It was striking to be in a large shopping centre in Sheffield recently and compare the huge crowds bustling around the tables in the Apple store with the tumbleweed blowing around HMV a hundred metres away. The fact is that while people are still purchasing music and film goods, they’re not purchasing them from HMV in the same volumes as was once the case.
And yet those who make, market and distrute entertainment goods, those who are supposed to know their onions in how to attract consumers, still persist in thinking that keeping HMV open is something which must be done at a huge cost to the industry. If HMV goes under in early 2013, what about the goods which it holds or the money it owes from sales over the Christmas season? Sure, a lot of the stock will have been purchased on consignment, but what about smaller labels who may get caught up in this fandango? Will they get paid or get unsold stock back? Do they have an equity stake in the company?
Then, there’s the arrival of Apollo Global Management on the scene snapping up cheap shares with a possible view to a takeover. What will that mean for the stores and, more pertinently, the suppliers who have kept HMV in business over the last few years? One solution which has been mooted is for the labels and suppliers to trump Apollo by taking over the whole business. Yet you have to wonder what good this scenario will do especially when you take that statement of fact from a few paragraphs ago into account: the customers have moved elsewhere to purchase their entertainment thrills. Perhaps it’s time for the industry to pay attention for once and kick this addiction to keeping HMV open.