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

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  • rate this

    Comment number 109.

    Regarding Vouchers - this is where an intelligent retailer would stand up and say that they would honour them - business wise, a whole load of customers looking for a new place to buy - such an easy way to acquire their business - and most likely for the long-term...

  • rate this

    Comment number 108.

    No mention of the fact that the competition from US based on-line retailers is not equal if they do not pay taxes in the UK

  • rate this

    Comment number 107.

    Has anyone noticed that the recently appointed CEO of HMV came from .............JESSOPS !

  • rate this

    Comment number 106.

    Feel sorry for customers over Christmas that gave gift cards as presents for them to now be useless. Management knew that they would not be able to survive much longer after the Christmas period but still continued to sell gift cards knowing only a proportion would be exchanged for goods. No morals just self interest....unwilling to invest in online early enough due to the investment required!

  • rate this

    Comment number 105.

    Yes. We should cut off dead leaves, abandon dried-up oil wells, terminate anything which no longer makes a profit... But what of the human factor? As Tweeted by two savvy commentators yesterday "So, UK High St 2020 will be hairdressers, Wetherspoons, nail bars and Costa." and thousands upon thousands of people begging'.
    Can't help remembering Oscar Wilde, 'price of everything, value of nothing'.

  • rate this

    Comment number 104.

    Its are own fault for allowing the younger generations to forget about the quality of the sound produced from vinyl and professional sound systems. HMV could have continued to sell mp3 downloads but they could have moved into more vinyl and professional sound systems. Kids and adult, buying £20 docking stations from argos, why? offer then easy payment options on proper sound systems, for quality

  • rate this

    Comment number 103.


    'you want to drive down the pay of some of the most important people in our society (nurses, carers, firemen, policeman, teachers etc'

    We can't afford to pay them so much. And they're no more important than farmers, lorry drivers, checkout girls, plumbers, electricians or any of the other private sector heroes that were skinned by Brown to buy public sector jobs (and votes).

  • rate this

    Comment number 102.

    Remind me again how much of the "excess capacity" in the banking industry has been removed by "putting lame companies out of their misery"?

    I'm sure all the banking zombies living off our tax bailouts are very happy to see other companies go to the wall while they continue to live out of our pockets.

    Meanwhile, the tax-dodgers keep on flooding the market with subsidised goods.

  • rate this

    Comment number 101.

    As much I love HMV this was inevitable any way. It has hardly any range of music stock now, much better going to a smaller independent record shops. I hadnt been into HMV in a long time as I didnt want to browse the range of Ipod docks.Not that I have any thing against advances in technology but I think its sad that the album as a physical piece of art is going to become obsolete.

  • rate this

    Comment number 100.

    Zombie company's clearly does not apply to banks.
    Perhaps if some of these deadwood institutions were allowed to go to the wall it would prompt the rest of the idle criminals to smarten their act up and start doing what they are supposed to do. Typically run an honest and fair business and lend money to other businesses instead of trying to screw the world and his wife out of every last penny.

  • rate this

    Comment number 99.

    Yet another "state the bleedin' obvious" article from Peston.
    This isn't even A level business studies quality , and yet people lap it up.

    And to the people who are still having a go at the Tories, you really need to grow up. Labour would be doing even worse as they really don't have a clue. Yes, Osbourne is slimy, but I'd rather have him in there than Balls and Walter the softy (Miliband).

  • rate this

    Comment number 98.

    I have £40 of Hmv vouchers from christmas, now found out we can not use them , what do i do now

  • rate this

    Comment number 97.

    Jessops, HMV, who is next? Any predictions?

  • rate this

    Comment number 96.

    Perhaps if HMV wasn't so expensive it would have attracted more customers. Everything was for sale at often much higher prices than online and even in other highstreet stores and supermarkets. The greed for profits has led to HMV's downfall.

  • rate this

    Comment number 95.


    We need real cuts like they're getting in Greece and Ireland. 25% off all public sector pay.
    So, you want to drive down the pay of some of the most important people in our society (nurses, carers, firemen, policeman, teachers etc.) while at the same time allowing a US multinational to avoid tax and give it to wealthy foreign shareholders instead?

    You've got issues mate...

  • rate this

    Comment number 94.

    Unfortunately this also means a business that pays tax in the uk has fallen to a business that doesnt.

  • rate this

    Comment number 93.

    I know that Amazon pays no tax; but when I ordered a DVD from HMV on the internet, it came from their company in the Channel Islands; so they were just as bad as Amazon for tax dodging; but they had a smaller choice and were not as efficient.

  • rate this

    Comment number 92.

    It's bad news - have just lost £50 in vouchers! Also, what about the 4,000 employees? I'm sure the financial industry is delighted at businesses such as these disappearing, but the financial industry doesn't seem particularly asdept at job creation.

  • rate this

    Comment number 91.

    Down they go 1 by 1.. paving the way for electronic (keeping the eye on you) cash.

  • rate this

    Comment number 90.

    A very well written article that puts a dose of reality on the economic situation - pruning dead wood will lead to fresh new shoots - ones that might are more align with customer shopping behaviour and adapt to future trends rather than stagnating with old shopping formats - and regarding the online argument, no one ever baned small shops from trading online - unfortunately adapt or die


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