Music giants rush to save HMV
The world’s biggest music labels and film studios are assembling a multimillion-pound rescue package to prevent HMV from going out of business. Universal Music, Warner Music and Sony are set to cut the price of CDs and DVDs, and give the retailer generous credit terms. Film giants, including 20th Century Fox, Universal Studios and Warner Bros, are also expected to throw their weight behind the rescue attempt.
Industry sources said the entertainment giants were desperate to keep alive a specialist retailer to avoid cut-throat pricing by supermarkets and internet distributors. “They don’t want their only choice to be Tesco or Amazon,” one source said. Despite its struggles, HMV still accounts for one-fifth of the British music and DVD market. The industry consortium is understood to favour a bid by Hilco, an investor that specialises in struggling retailers
. Hilco is best known in Britain for salvaging Habitat. Last year it bought HMV’s Canadian arm. “They will put their weight behind anyone who has a viable plan, but Hilco has a head start,” one source close to the talks said.
Last week HMV became one of the biggest high street casualties since the financial crisis began when it collapsed into administration. It has about 4,350 staff, mostly in its 220 stores in the UK and Ireland, and a handful of shops abroad, including sites in Hong Kong and Singapore.
Administrators from Deloitte were called in on Monday after poor Christmas trading. HMV’s demise came during a miserable few days for retailers in which Jessops, the camera specialist, and Blockbuster, the DVD rental company, also went under. Deloitte is now seeking investors willing to save the 92-year-old chain, whose slow unravelling was caused by its failure to keep up with fierce competition from the internet and supermarkets. Several interested parties have already come forward but only a few are being taken seriously. Retail experts think HMV has a future if it can shed its debts and half its stores.
A new owner will need the continued support of HMV’s suppliers, which fought to keep it out of administration. Last year they relaxed payment terms in return for a small parcel of shares, and in the crucial trading period before Christmas they provided help worth tens of millions of pounds.
Among the lifelines under consideration is a further extension to HMV’s credit lines, with some suppliers considering slashing prices, sources said. If HMV were allowed to go under, the big labels would cede even more power to Amazon and to Apple, whose iTunes store now dominates the music industry
The stakes are even greater for Universal Music. It inherited the liability for the rent on 16 HMV stores when it took over EMI, the record label, last year. EMI was one of the investors that floated HMV in 2002. Universal could face a rental bill of millions of pounds if the stores are left vacant.
The administrators are convinced HMV can be rescued. “We’re confident a deal could be announced soon,” a source close to the company said.
Administrators to Blockbuster also hope to find a buyer for the rental business despite the closure of 129 stores yesterday with the loss of 760 jobs. These closures were in addition to 31 that had been announced earlier. Retail analysts are sceptical about the chain’s future. (Source