Is there good news in HMV's collapse?

HMV's Nipper dog Will HMV's iconic Nipper dog brand now be put to sleep?

Here are two big questions about the collapse into administration of HMV.

Will it go the way of Jessops and Comet? Will all 239 stores be closed, with the loss of all 4,000 jobs?

And is there a rising incidence of corporate insolvencies which could actually be a good thing, in the widest possible sense (please bear with me; I haven't taken leave of my senses or transmogrified into some kind of insane company necrophiliac)?

On the first question, what future holds for HMV and its people, the outlook looks considerably better than for other recently kaput store groups.

And the reason, according to influential sources close to HMV, is that the music industry and the film industry want its survival, albeit they recognise that will have to be with fewer stores and with fewer locations.

Record labels (are they still called that or am I showing my age?) and DVD distributors don't want to be wholly dependent for sales on Amazon and Apple's iTunes.

So Deloitte, appointed as administrators to HMV last night, is working on the assumption that these important suppliers will help the creation of a slimmed-down and viable HMV.

This is unlikely to involve these suppliers actually buying HMV out of administration. Much more likely is that they would provide easy credit terms to a buyer - which will very likely be a private equity group (right now, again, there is too much money in private equity chasing too few deals).

Start Quote

We do need to have a situation where bad businesses fail, otherwise the economy will stack up with progressively weaker business models and growth will go into reverse”

End Quote Jon Moulton Investor and entrepreneur

Now on to my hideously heartless question whether the collapse of HMV is good for the rest of us.

First of all, I had better explain what I mean.

The evidence of past recessions is that economic growth doesn't resume at any great velocity until unviable and inefficient businesses are put of their misery and excess capacity in various industries is eliminated.

Now, although there has been a fair old number of retailing collapses in the past year or so (according to FRP Advisory, HMV is the 32nd significant retail chain to go into administration in just over a year), there have been many fewer corporate collapses since the financial crisis of 2008 than was predictable on the basis of past economic experience.

As you will know (don't yawn) if you read this column, this economic malaise has been characterised by many weak businesses being put on life support and turned into the living dead, or (to use what is now a cliche, so sorry) zombies.

This is good for the employees of these companies, for a while at least.

But, many would argue, it is not good for the economy in the long run. Because it preserves excess capacity, in a way that makes it more difficult for new business to grow and thrive, and it also holds back the progress of bigger more successful businesses.

So if HMV's demise signals a rising incidence of banks and other creditors being more ruthless in putting lame companies out of their misery, that might in a fundamental sense be quite a good thing.

And if those rising corporate mortality rates were real, it would also show that banks were feeling increasingly confident that they have sufficient capital to absorb the consequential losses - which would also be a very positive sign, in that banks would also have sufficient capital to extend necessary credit to viable businesses.

Here's the bad news (please forgive).

According to leading administrators, so far the underlying trend of corporate deaths does not seem to have risen much. The number of companies going into administration is still bumping along at a relatively low level.

If it doesn't feel that way, that's simply because recently companies that have gone down - Comet, Jessops and HMV - were so visible and famous.

But there are still plenty - far too many - corporate zombies that are clinging on and holding back job creation by companies with much better prospects.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

Why is the Treasury's interest rate so low?

How should the government take advantage of the record low interest rates it pays?

Read full article

More on This Story

More from Robert


This entry is now closed for comments

Jump to comments pagination
  • rate this

    Comment number 49.

    How sad. HMV, as far as I know, don't dodge tax.

    Amazon DO dodge tax, and continue to be "successful".

  • rate this

    Comment number 48.

    Many would say these companies that are "excess capacity"draws parallels with the welfare state...additionally, any jobs created by the government to quell unemployment (e.g. building) are also excess as they do not fit into the "normal" structure of things...

  • rate this

    Comment number 47.

    What I think is a total disgrace in these circumstances is the retailers not accepting vouchers or gift cards. They have already received the well earned money of the people who purchased these and should therefore honour them. Total disgrace.

  • rate this

    Comment number 46.

    HMV has known for years they were going under, and they didnt do enough to stop the slide - its their own fault, they were not competitive with pricing, and their business model became increasingly irrelevant. What makes me laugh is Simon fox saying he'd done a grand job in saving them - he was largely the reason they failed.

  • rate this

    Comment number 45.

    sad for the employees, but this is called progress. It is what happens, business evolves, the outmoded become extinct, the new opportunists start to thrive.

  • rate this

    Comment number 44.

    As a consumer why should I be expected to pay a higher price for goods just to pay the extremely high rents/leases and business rates of high street shops? Furthermore any retail business that can offer lower prices by reducing their costs and taxes is going to succeed in getting my business compared to those more expensive and inconvenient high street shops where the car parking fees add to costs

  • rate this

    Comment number 43.

    If you are careful, offline stores can often be cheaper than online. Just as HMV is cheaper than Sains**** for some items, and more expensive for others.
    Retailers caught on to "online is cheaper" years ago and raised online prices to match those in stores. Today, much of the time, "online is cheaper" is a myth.
    Mr. P., you really should go shopping more often. [Apologies for the typing errors.]

  • rate this

    Comment number 42.

    @ 2. Dr Bob Matthews

    "The UK has got to get out of the short term mode of operation and plan and invest for the future.
    Try convincing greedy shareholders!"

    Or shot term greedy consumers. A cheaper DVD from Amazon today is not always a cheaper DVD tomorrow.

  • rate this

    Comment number 41.

    The issue goes far deeper than just HMV, with one editor of afamous music magazine focused on the heavier side of the spectrum taking to Twitter last night to declare that he doesn't 'give a **** about the music industry, only about music'. When there are people like this high up in it, what hope is there?

    Moving forwards, hopefully we'll return to the older, independent record stores.

  • rate this

    Comment number 40.

    If HMV goes then what choice for people who want music of a better quality than can be downloaded, which only sounds good on MP3 players with headphones(devices where MP3 players play through speakers can't hide the quality). Supermarkets stock top 40 at best, and using Amazon depends on home letterbox big enough or indulgent workplace to take delivery. Quality Hi-Fi makers out of business next?

  • rate this

    Comment number 39.

    In the long run a zombie apocalypse might be a good thing (as USA 1930's shows). But if they all go together then the govt's revenue will plummet in the short term and they will use that as an excuse to hammer the poor.

    Realistically bankruptcy is the only way we're going to pay down the massive private sector debts incurred during the 90s and 00s.

    Like others I worry about zombie banks.

  • rate this

    Comment number 38.

    A significant change in consumer trends as a result of online retail is the death of traditional consumer loyalty - when we have the ability to price check several suppliers in a matter of seconds we tend to go with the cheapest provider. With good reason. It's good for consumers in terms of value for money, but it will be the death of the high street where shops cannot compete with overheads.

  • rate this

    Comment number 37.

    I haven't had a CD or DVD player in 5 years, its all hard drive and SD, USB readers reading mp3 (make sure you get a good professional one) and my films play through a hard drive, I know people who haven't had CD and DVD player for longer then that, were been buying from HMV digital online. I hope they keep HVM digital going though I can't see why they wouldn't, its a great site for mp3 downloads.

  • rate this

    Comment number 36.

    "Fewer stores in fewer locations" whilst the major shopping destinations will survive the smaller towns and second tier Shopping Centres are now in many cases struggling remain relevant. Whilst it would be good to think that Independents can take over the empty units left by the likes of Comet and probably HMV without any of these names it hard to attract footfall to these locations.

  • rate this

    Comment number 35.

    I used to go into HMV, look at a CD or DVD and think "how much ?", then go home and buy it on-line.

    But now, most of their floor space is taken up selling electronics, there's hardly any music anyway.

    And when it comes to CDs/DVDs, the only thing that matters is price, it's not like they are offering any "customer service".

    It's no wonder they have gone pop.

  • rate this

    Comment number 34.

    Robert Zombie companies? Does the same rule apply to Zombie countries?

  • rate this

    Comment number 33.

    From my comment @ 14 - I would add that whilst HMV haven't helped themselves the sad fact is that HMV has a load of expensive High St shops, employs loads of people and is UK based for tax. Amazon on the other hand pays no tax, has a few massive warehouses & employs a few forklift drivers & box packers - although not necersarily in the UK. Level playing field?

  • rate this

    Comment number 32.

    The other question is: how did HMV last so long on life support? The answer to that would seem to be that the current ultra low base rate is keeping these places around. Raising the base rate will signla the beginning of the end. The sooner the better.

  • rate this

    Comment number 31.

    HMV were in prime position to make the move online in the 1990's and failed to do it. By the time they did have an online presence Amazon and had taken over.

    They still have a good brand, but the industry is so price sensitive it's difficult to see how they can continue to have a high street presence.

  • rate this

    Comment number 30.

    I have signed up on the BBC comments site just so I can 'rate-up' Scott's comment of 13 or 14 minutes ago. It bears re-stating; If zombie companies should be allowed to die, why are the zombie banks allowed to continue, being supported with amounts of tax-payers money that defy belief?


Page 36 of 38



Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.