HMV: What’s In Store for the Entertainment Retailer?

Late on Monday 14th January, British entertainment retail chain HMV announced that it would be calling in administrators from Deloitte to help take control of the company’s financial situation.

The necessity of the appointment can hardly have come as a surprise to the senior staff of the company and stock exchange analysts following the release of it’s third quarter figures in mid-December. While operating loss and total loss had slightly improved in the 26 week period along with the company’s Earnings Per Share (EPS) from continuing operations being adjusted to a still unfavourable loss of 8.1p, the entertainment retail giant was still haemorrhaging money as sales dropped from the previous years figures by a further 10% increasing the business’s debt even further.

So, what does this all mean? Well, if all this has gone a bit over your head: HMV has been losing money on a year-on-year basis and it’s not been improving. As a result, they’ve had to call in Deloitte in the hope of digging them out of this situation, putting 4,500 jobs at risk. HMV’s CEO Trevor Moore told the BBC today that they “remain convinced of a successful business outcome”. But, bad news for those of you that received HMV gift vouchers for Christmas, in the same interview it was confirmed that the company would no longer be issuing or accepting any gift cards.

HMV has it’s humble beginnings in the 1890s and by the early 1900s had become the Gramophone Company and trademarked it’s world famous logo, a reworking of Francis Barraud’s 1899 painting – ‘His Master’s Voice’. It wasn’t until 1921 that the first HMV store was opened on Oxford Street, London. Fast forward 90 years of continued growth and we see a spin off from EMI records to form HMV media, the company purchasing Waterstones and Ottakar’s book chains but later selling it off the former as well as acquisitions of Zavvi and Fopp. In fact, there was a point where if you were in the entertainment retail business it was only a matter of time before a representative from HMV would be knocking on your door recommending a merger. The company truly has been a pioneer of the entertainment industry.

HMV’s flagship store in Oxford Street

This leaves us to question: Where did it all go wrong? Many attribute the company’s financial struggles to the rise of ‘download culture’, an all too easy scapegoat for the entertainment industry’s shortcomings. Many of us must admit that if we even own a dedicated CD player, it hardly gets used. The advent of the mp3 may have ushered in the digital revolution, but there are far more issues at work here that drove the public, rushing into it’s arms. After all, it’s not just the retail side of the HMV group that has gone into administration; it’s the whole company!

We might argue that it’s our modern ‘one-stop-shop’ attitude that has aided the decline of not just HMV, but the entertainment industry as a whole. It’s rare to find a supermarket or convenience store that doesn’t have a dedicated DVD or CD shelf, or even just a bargain bin by the checkout. It’s not very often that we’re willing to spend the day popping across from shop to shop to collect our essentials, let alone our luxuries.

Furthermore, we might be inclined to blame the financial climate ever since the recession hit, though analysts have argued that in previous times of financial hardship the entertainment industries have benefited as a result of a ‘means of escape’. This would be somewhat simpler if companies such as HMV weren’t charging £15 for a film that came out in June (and, seeing as I’m already ranting: £60 for the cheap seats at a football game?!). So, while it is much easier to pop to your local supermarket or go online and download some films or music, it’s also considerably cheaper. And, let’s not even get started on concert tickets, another branch of the HMV group…

The company will likely now be forced in to an extended January sale period as they try to flog the remaining stock and step back to assess the situation (so, get in their quick if you want some bargains). I do blame the industry for it’s failure to adapt to the modern times but there is always some blame to be put on us as consumers. Nonetheless, despite my cynicism, I am confident that the company will be able to recover in the future and start to build up from the ashes once again but in a new era of entertainment consumption, the market calls for a new brand of entertainment retailer. His Master’s Voice isn’t gone, it’s just muffled…