HMV Film and Music Store to Appoint Administrator
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DVD and music chain HMV, which is the United Kingdom’s last main-street music store and one of the largest record store chains in the world, is set to appoint an administrator, putting approximately four thousand three hundred and fifty jobs in the UK at risk. HMV opened its first store in London in 1921, selling gramophones, recordings and sheet music. However the chain has struggled to keep up with technology. The music industry has experienced a number of significant changes throughout HMV’s history, perhaps the most important being the increase in the number of people buying music in digital formats, which has led to a drop in the sale of CDs and consequently negatively impacted upon the store’s sales. In a report issued in 2012, the International Federation of the Phonographic Industry stated that the sale of CDs and other physical music formats had dropped from just under one hundred and forty-six million united to just over ninety-two million units in 2011. This is a fall of over twenty percent.
Buying and Selling Shares Suspended
In a statement released earlier this week, a spokesman for HMV announced that people would no longer be able to sell or invest in its ordinary shares. He said that the selling and buying of shares was to be halted immediately and proposed that Deloitte LP was appointed as the administrator of the chain and its subsidiaries. The spokesman also expressed HMV’s regret at the fact that the chain had reached a position where it was unable to carry on trading outside of insolvency protection.
Not A Surprise
Whilst the news is a tremendous blow to the British music industry, it does not come as a surprise, as in December 2012, the company warned that current market trading conditions had resulted in material uncertainties for the business. HMV’s most recent financial records, which cover the half-year ending October 27th 2012, report a fifty-eight and a half million dollar first-half loss, with sales totals falling thirteen and a half percent from the previous year. Despite the company selling a number of its live assets throughout last year, including flagship venue the Hammersmith Apollo in London, which was sold to German-American joint venture Stage C for the equivalent of just under fifty-two million dollars, HMV’s underlying net debt was still just under the equivalent of two hundred and eighty-five and a half million US dollars.
Failure to Keep Up
HMV managed to hang on longer than its rival UK main-street music stores, which included Zavvi, Virgin Megastore, Our Price and Tower Records. It also invested in the online market in an attempt to save itself, selling music from its website HMV.com and buying a fifty percent stake in digital music company 7Digital in 2009. However analysts believe that the company left it too late to take these steps. Retail research director at research agency Conlumino Matt Piner says that by the time HMV started focussing upon online music sales, the main players in that area had already been established. Essentially it failed it keep up. The sale of digital music singles and albums rose from just over eighty-four million units in 2007 to just under two hundred and three million units in 2011. Critics claim that HMV should have focussed more upon the sale of digital singles and albums and less upon the physical formats of music that they sold in their stores.
Implications for Other UK Music and Film Retailers
There are only a couple of hundred independent record shops remaining in the UK. Conlumino estimates that ninety percent of music and video sales in the country will be made online by 2015. Non-specialist stalls and supermarkets are predicted to comprise the majority of physical music and film sales by that date. With so many other ways of accessing movies and music coming into existence, physical DVDs and CDs are likely to become a lot less popular. Piner says that by 2020, the physical product is likely to become a thing of the past. The days of record shops in other countries across the globe being profitable might also be numbered. It appears that buying CDs is now a dying practice and the record stores of the future will all be internet-based.
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