HMV for victory: Why the music biz needs to help save the UK's last big High Street retailer

HMV

Who wants to save HMV? Well, according to a spokesperson from administrators KPMG, a few people might.

The firm says it has received “a number of expressions of interest in the HMV business” since it went into administration, although it adds that it has not yet received an approach or had any contact to date from BuyVia – the discount club which last week said it was interested in a rescue bid.

Still, if you think things are bad now, remember that, when the retailer called in the administrators the first time, back in 2013, there was a palpable sense of panic in the music industry.

Understandable, really. Back then, according to the BPI, 61.4 million physical albums were sold in the UK, while streaming accounted for just 6.2% of Album Equivalent Sales.

In 2018, those figures were 36.2m and 63.6% respectively, indicative of a huge shift in consumption across an industry that was in the doldrums in 2013 but is now, definitively, back on the rise.

So, while HMV’s second administration was enough to jolt those involved in the sale and distribution of physical product out of their post-Boxing Day reverie, the wider industry seems more sanguine about the situation this time around.

Which is not to say they’re not concerned. Evidence from previous chain closures suggests around half of HMV’s still-considerable sales could disappear completely, should the stores ultimately vanish from our High Streets.

If that happens, there may be some residual benefit for other retailers, particularly Amazon, but supermarkets have already cut their music retail space, meaning there will be little of interest for many HMV customers. Meanwhile, the impact on distribution and other parts of the value chain may actually mean that scenario would have a negative, rather than positive, effect on independent retailers.

All of which makes HMV well worth saving for the music industry – and there is still plenty to save. It is, after all, back in place as the physical music sector’s market-leader and, unlike in 2013, Music Week understands most of its 125-odd stores are individually profitable. All stores remain open and are said by KPMG to be trading well.

 

The best bet for survival in something approaching HMV’s current form could be a buyout of a select group of (profitable) stores

 

The crunch will come, of course, when the big new 2019 releases start coming through. Will labels and distributors supply a chain that might not be there soon? Anyone who remembers the last administration will recall the piles of cheap old CDs in the old Oxford Street flagship shop failing to make up for the absence of some new releases.

HMV’s business was in much worse shape then but, counter-intuitively, that made it much easier to rescue. It was relatively simple for Hilco to identify areas for improvement and act on them. But, by all accounts, HMV 2019 is a well-run business and, bar the drag of a few high-profile-but-unprofitable stores, if a turnaround specialist like Hilco can’t spot the savings, who else is going to?

If BuyVia fails to firm up its interest – not that anyone in the industry seems particularly keen on that option – and another white knight fails to appear, the best bet for survival in something approaching HMV’s current form could be a buyout of a select group of (profitable) stores. That might shield the business from the most toxic side effects of the High Street meltdown, and allow a regroup and time to boost its online operations further.

Whether there’s a more transformative approach along the lines of the music industry’s own revival seems more unlikely. The Official Charts Company’s figures show actual sales of albums in Q4 slumped 23% year-on-year – that’s over four million fewer units than in 2017, and that trend is only going one way. Then again, 2018 lacked an Ed Sheeran-style physical blockbuster release, and there could potentially be some of those on the way in 2019.

Some Scandinavian markets have, of course, shown that the industry can go (almost) fully-digital and still grow. But the UK streaming revolution has been under-pinned by its surprisingly robust physical figures and there will be few in the music industry ready to walk away from HMV’s share of a £383m business just yet.

So, while there may be no need to panic this time around, the loss of Nipper’s bark on the High Street could still bite. Who wants to save HMV? Time, surely, for the music industry to help find someone…

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