Record retailer goes into administration while former ad exec blames luddite attitude
Words Jeremy Allen
So HMV is about to make its final trip to the vets, and the only relief for us will be the fact we’ve run out of dog puns. The retailer has been on our high streets for 92 years here in Blighty, and yet the current financial restraints on consumers coupled with all out attack from the internet means the dog has finally had its day…and the expertise of Deloitte, the administrators, is required. It had been a long time in coming.
The music, DVD and computer games specialist, which has 236 stores and almost 4,500 staff, had been proverbially sailing close to the wind for some time. In May 2011 it passed its troublesome Waterstone’s, the book subsidiary that was also beginning to look less like a shop and more like an heirloom on the high street, but that sale proved to be yet another temporary reprieve while more money disappeared into a hole.
Last year, outgoing chairman Simon Fox assured shareholders everything would be peachy come summertime. Yet having deserted the sinking ship, it didn’t matter much to Fox whether that would come true or not. In any event it didn’t, and the retail giant had a torrid time in the run up to Christmas this year as consumers eschewed the bus, walking and human contact for stuff arriving facelessly with no fuss. The firm also sold most of its live venues in December, having reported a 10.2% drop in half-year like-for-like sales and losses of £36.1m.
And now it appears there’s no way back for HMV. Whether you baulk at this news or not will depend on how old you are. At least for collectors of physical music, this feels like a watershed moment, as the last tangible bellwether of the old world sinks without trace.
Seasonal sales finally did for His Master’s Voice. It had secured a reported £40m in support from entertainment suppliers in the run-up to Christmas, who saw the chain as a last bulwark against online retailers offering reduced profit margins. Deloitte was called in after last-ditch new year sales failed to halt a massive slump in trading, and debts spiralled to £220m. It was thought that Apollo Global Management was interested in purchasing the company after buying some of its debt, but the private equity firm moved to deny the rumours yesterday.
With shares in the company closing last night at just 1.1p — compared with a 274p high in 2005 — Philip Beeching, an advertising executive who worked the HMV account for 25 years, wrote that the company’s chief mistake was to diversify into electronics and live music instead of expanding its online retail empire.
In one telling exchange, he remembers re-pitching for HMV’s advertising account just after the company was floated on the stock market in 2002: “As I had worked on the account for so long and felt it was in my blood, I really wanted to give it my all, so we pulled out all the stops in this five-way pitch. The day of the presentation came and we stood in the boardroom in front of the new MD, Steve Knott and his directors. For some time we had felt the tides of change coming for HMV and here was our perfect opportunity to unambiguously say what we felt. The relevant chart went up and I said, ‘The three greatest threats to HMV are: online retailers, downloadable music and supermarkets discounting loss leader product.’ Suddenly I realised the MD had stopped the meeting and was visibly angry. ‘I have never heard such rubbish,’ he said, ‘I accept that supermarkets are a thorn in our side but not for the serious music, games or film buyer and as for the other two, I don’t ever see them being a real threat, downloadable music is just a fad and people will always want the atmosphere and experience of a music store rather than online shopping.’ It’s important to remember that the dotcom bubble had just burst and many people were mistaking this stockmarket meltdown for an internet meltdown. As we sat reflecting in the pub afterwards we felt decidedly winded by his onslaught but a few weeks later we were to discover, somewhat to our surprise, we had held on to the business. Virtually none of what we recommended ever saw the light of day but sometimes during difficult times clients simply want the comfort blanket of what’s familiar.”
He also recalls speaking to the founders of online music store Play.com, who remembered waiting for HMV to “turn their big guns” on the then-thriving business. They could hardly believe their luck when the shots never came.