Published on January 17th, 2013 | by Alan Cross0
Why HMV UK’s Troubles Spell Trouble for Others
[NOTE: Everything you’re about to read applies only to HMV UK. Because there’s still some confusion, I have to reiterate that HMV UK’s fortunes are NOT tied to HMV Canada, which is completely seperate company and is unaffected by what’s happening with the company that runs stores in the UK, Ireland, Hong Kong and Singapore.]
Monday night, HMV UK threw in the towel, announcing that they were going to go into “administration,” which is Brit-speak for “receivership” and “bankruptcy.” At the time HMV shares stopped trading, they were valued at just over a pence–less than 2 cents.
So now what? How do you wind down such a big operation? And what are the residual effects? Let’s take a look.
–There are 239 stores until HMV UK’s control. Some 4,000 staffers are also affected.
–HMV controls 40% of the music market in the UK. The rest is controlled by supermarkets, almost none of which will stock anything other than the biggest chart hits. That sucks for people who still want to buy CDs by non-mainstream acts. Or vinyl, for that matter.
–At the moment, there’s a fire sale on stock with prices at least 25% off. Everything must go.
–What will this mean for the future of physical music sales? Will this hasten the transition to digital? That’s a possibility.
–Labels that sell product through HMV UK are worried. Will they get anything back on what’s already been shipped to stores? Companies like World Music News Network sells 50% of their volume through HMV UK.
–Proper Music Distribution and Pias are also rather anxious. They’re the companies that get most non-major label releases into the stores. Pias, for example, worked with Beggars Banquet to get Adele on the shelves.
–Word is they haven’t been paid in months. Some are predicting that anyone owed anything by an indie distributor can kiss their expected cheques goodbye. Some of these indie distributors will not survive themselves.
—According to the BBC, most record stores pay their suppliers within 30 days but because of HMV’s financial problems, most allow for accounts payable to age to 60 days. This means suppliers will be waiting well into the spring to see if they get paid.
–Some people are predicting HMV will re-emerge smaller and tighter with perhaps 50 stores.
–Others are predicting that after a rough period, this will actually turn out to be a good thing. If sales of physical media drop below a certain, things get rather interesting. No more issues about manufacturing, distribution and warehousing. Could this level the playing field for all labels?