Last month, HMV warned that it was sliding perilously close to breaching its banking covenants after falling revenues in the first half. Despite a £40m cash injection from its suppliers to keep the firm afloat over Christmas, festive sales failed to hit the right note, even with a month-long sale slashing 25% off all prices.
A statement from HMV’s board reads: ‘[HMV] has been unable to reach a position where it feels able to continue to trade outside of insolvency protection.’
Administrator Deloitte has been appointed to find a buyer for HMV and its subsidiaries (it also owns Fopp) and save 4,350 jobs. So far, however, there are no knights (in white satin) on the horizon. Universal Music, which is liable for the rent of around 40 of HMV’s 239 stores, could be landed with a £150m bill if no buyer comes forward. Universal assumed the guarantee when it bought EMI, the retailer’s former parent company at the close of 2012.
Trading in HMV shares on the London Stock Exchange has been suspended and – bad news teenagers, for whom HMV gift cards were always a staple at Christmas (at least in MT's day) – the firm will no longer be accepting vouchers. The stores will continue to trade in the short-term, however.
HMV’s business has been eaten away by online retailers like Amazon and iTunes, and by the mass discounting on music and dvds at supermarkets. It has also suffered as the black market in peer-to-peer music sharing has grown apace. In order to stave off bankruptcy, the chain – which was first opened by Sir Edward Elgar on Oxford St in 1921 – has sold off a number of its assets, from the Waterstones book chain to the Mama live entertainment arm. HMV - His Master's Voice - definitely has the volume turned down.
Industry pundits reckon that HMV has been the architect of its own demise, however. It was very late to the party with an online offering, and continued to renew leases on poorly-performing stores when the company should have been concentrating on its big earners.
But there may be hope yet for the retailer. Many consumers still want to browse – in the real world – for their music, games and movies, As Andy Heath, chair of UK Music, explained on the Today programme this morning, ‘There is still significant and very large demand for people wanting to buy music in the high street.’
And the media industry itself has a vested interest in keeping the business going. Robert Peston, business editor for the BBC, writes today, ‘For HMV and its people, the outlook looks considerably better than for other recently kaput store groups. The music industry and the film industry want its survival, albeit they recognise that will have to be with fewer stores and with fewer locations. Record labels (are they still called that or am I showing my age?) and DVD distributors don't want to be wholly dependent for sales on Amazon and Apple's iTunes.’
So, will the fat lady sing for HMV or is this, as UK Music’s Heath puts it, ‘an opportunity for a substantial and decent rebirth’? MT will keep its ear to the ground.