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

UK living too high on the hog (again)

How worried should we be by the UK's record current account deficit, our inability to pay our way in the world?

Read full article

More on This Story

More from Robert

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +2

    Comment number 89.

    i would meet up with my friends at Hmv and spend hours looking at cds of what to buy. i think i bought over 30 cds at one point they were all classic rock bands of the 70's. I go for cds over downloaded music no matter what. i still own records and cassette tapes from what my dad gave me. Hmv introduced me to new and old music and even got me a girlfriend at one time (we both went for the same cd)

  • rate this
    0

    Comment number 88.

    I believe there is room for a store like HMV on the high street. Their business model however was completely wrong. You need to draw people in, specialised music, vinyl would have been a better model than competing in the DVD, electronics market. HMV may survived with a few large stores in London, Birmingham, ECT but elsewhere I think it’s toast.

  • rate this
    +10

    Comment number 87.

    Soon, all that will be left of retail in the UK will be Tesco and Amazon.

    Very sad.

  • rate this
    0

    Comment number 86.

    Went to HMV last week looking for three CD's, none in the store, went and bought them on Amazon...

    ...HMV fell into the let's try and make everybody happy trap and ended up making nobody happy. Nobody has a difference anymore, everyone is homogenised, from supermarkets to newsagents to music shops to garage forecourts. We sold our souls for sales growth and cost cutting.

  • rate this
    -1

    Comment number 85.

    A sad reality of online shopping. Anything the high street can do online stores can do better and with less fuss for the consumer; and we're all guilty of HMV and other stores demise.
    I am afraid this is only the tip of the iceberg.

  • rate this
    +1

    Comment number 84.

    On 'High Street vs Internet' - perhaps record shops (& bookstores) should copy an idea from the role-playing games industry called 'Bits & Mortar' - in this, you buy a game book from a store & get a free PDF download as well.

  • rate this
    0

    Comment number 83.

    I used to love going into Virgin to listen to the music within their preview section. HMV's format hasn't changed since I can remember - With Itunes now giving samples of songs to listen to before you buy is it any wonder that people are buying less of the "sight unseen" records which to repeat a number of previous comments are at far more expensive prices than online.

  • rate this
    -1

    Comment number 82.

    Slasher Cameron & the boy Giedeon (our work experience Chancellor) have been telling us until they are blue in the face that the public sector was squeezing out the private sector....


    ....they have massivelt scaled back the public sector & look.....



    ....the private sector is also going to the wall......


    ....the most important thing the private sector needs is demand....

  • rate this
    +1

    Comment number 81.

    Digital downloads are having their effect as digital images have decimated professional photographers and processing laboratories, or hadn't you noticed?

  • rate this
    +2

    Comment number 80.

    Resources shouldn't be wasted and allocated to where growth is possible and jobs and taxes created. Unfortunately Amazon is shy of paying taxes and often sponges the resources of other companies as their customers have their products delivered to the workplace. If workplaces banned this which is a cost to them and a subsidy to Amazon, would mean a trip by buyers to a depot to get their purchases.

  • rate this
    +5

    Comment number 79.

    We have all have a hand in the demise of the high street. The majority of us would rather pay a few pound less to an internet retailer or supermarket rather than support our local businesses. As a result, the high streets are populated with coffee shops, mini-supermarkets, tourist shops and charity shops. As consumers, soon the only choice we will have will be the supermarkets or the internet.

  • rate this
    +1

    Comment number 78.

    Sorry Robert, didn't read all the comments, to busy rushing off to work, small shop and I'm 68years old but can't stop, I think they call it progress however, as usual you missed the real villain, the internet. Our beloved leaders are so busy taxing normal businesses that they fail to get their hands on a slice of the cake that getting fatter & fatter at the expense of the high street.

  • rate this
    +2

    Comment number 77.

    Love my music and especially the physical product over a download but HMV has been in decline for years. You go into a HMV store and see a cd or dvd and if you check the price on their online store its cheaper. No surprise it has declined really when its like that. Doesn't help that they never have the stock in your looking for. Last 3 times I've been in they haven't stocked dvds I was after

  • rate this
    0

    Comment number 76.

    There's an (awful) lot of (brackets) in (this) (article).

  • rate this
    0

    Comment number 75.

    Not sure on my opinion, sad because i used to enjoy the odd browse in HMV looking at DVD's and CD's.

    But as a consumer i often get much better deals online through Play, amazon etc..

    I think the biggest problem for the high street are stupid property prices (equals stupid rents) and online companies need not worry about it.

    Property prices have a huge impact on the high street.

  • rate this
    +2

    Comment number 74.

    @68:

    "When you're buying DVDs, CDs and electronic items you go for the best quality you can afford at the lowest price you can find - sadly, the High Street doesn't offer this."

    The High Street doesn't offer this because it can't offer this. Amazon, Play, iTunes etc aggressively avoid tax and can offer cheaper deals than those who comply in spirit of Corporate Tax.

  • rate this
    +12

    Comment number 73.

    A lot of the problems with these types of shps, HMV, Comet, JJB etc, is that they employ kids on minimum wage. They have no interest in what they do, why should they, no serive, no knowledge, no courtesy. I object to being called mate by someone half my age, and would like to go to a shop where they actually know something about there products!

  • Comment number 72.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +37

    Comment number 71.

    @49 'HMV don't dodge tax'. They wouldn't have to. Companies that make a loss (as HMV have done for a number of years) don't pay any corporation tax.

  • rate this
    +1

    Comment number 70.

    If we could save banks, who brought this on themselves, why can't we save retail businesses? In fact, aren't we subsidising the banks in order that they save retail businesses?

 

Page 34 of 38

 

Features

BBC © 2014 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.