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 289.

    Shame that 'the banks' which in 20078 constituted a 'zombie sector' got and is continually boosted by state/central bank injections of billions.

    Noticed prices rising? Well thats down to Central banks printing money to help banks out. In the meantime have you seen your bank charges go down? No

    Mugs the lot of us apparently

  • rate this

    Comment number 288.

    A few years ago I went to my local town of Falmouth to purchase Don Mclean's American Pie CD from HMV. Astonished at the price (£15) I came home and bought it online for about a fiver p&p included. And that was all the way from California!!!

  • rate this

    Comment number 287.

    It is the former CEO, Simon Fox, who is responsible for the demise of HMV (not Trevor Moore who was parachuted in 5 months b4 the money ran out)

    There for 6 years, most years he took his bonus, he left in Aug 2012, the chairman stated he had "played an invaluable part in securing HMV's future"

    He is now at Trinity Mirror where he will get the best part of £2M per year. (b4 they go the same way)

  • rate this

    Comment number 286.

    I can spend hours looking in the "2 CD's for £10" section, this will leave a massive hole in my life if they disappear.

    You get better value with this deal than you do buying off iTunes!

  • rate this

    Comment number 285.

    I'm sure another bar or pub will open up in many of the towns and cities where HMV stores once stood. We can never have too many of those can we? The reason I stopped shopping in town centers around 5 years ago was not the quality of shops, but the fact that many are frequented by people intent on causing trouble or just generally being abusive to people out shopping or going about their business.

  • rate this

    Comment number 284.

    Interesting that the industry does not want to have iTunes & amazon as their only outlets, but did anyone ask the customers? The music industry made decisions about how to do things based on what they want to happen rather than how the customers were acting. Looking to the younger, under 20's, music has been mostly free for them, so trying to charge them now is going to be very hard.

  • rate this

    Comment number 283.

    Though I feel for those losing their job in the high street, and I will miss the memory of HMV, there's a lot of finger pointing at people shopping online, goind for a better deal. Where I live, there are very few independent shops on the High Street, and they're doing a roaring trade. For the big chains, am I really expected to pay more money for a worse selection? I don't think so.

  • rate this

    Comment number 282.

    Most music buyers are not enthusiasts, they will download (often for free) and put up with the poor quality sound you get with 256k bitrates. The big suppliers in this market are based abroad, avoid VAT and pay little or no tax, mainstream physical shops can't compete for the mass market. Music beyond the "top 40" is niche and may survive on the high street, the big boys aren't interested.

  • rate this

    Comment number 281.

    The corporate zombies that needed to be got rid of to stop the recession were Northern rock, RBS, Lloyds and the other banks that gambled away our money.

    But no, Politicians and so close with Bankers the rest of us will paying for their failure for the next twenty years.

  • rate this

    Comment number 280.

    @ 40.philjer

    HMV would be the last place to look for 'quality music'. Just to advise, you can actually download music in lossless quality (google 'flac'), which is indistinguishable from CD quality. The market for high end audio products is also doing fine, but it never included HMV in the first place. Also the postal system has been around for a long time, most people have a handle on it...

  • rate this

    Comment number 279.

    "the music industry and the film industry want its survival" - this phrase worries me. The entertainment industry want to keep their old, outdated business model going. Surely the collapse of HMV shows that it is now nonviable. To me the collapse of HMV is a good thing, becuase it might help be the wakeup call the entertainment industry needs to change its distribution and business policies.

  • rate this

    Comment number 278.

    The High Street is toast.

    Groceries will be bought at out of town supermarkets where the car will be filled up too.

    Trinkets (Electronics of all kind.) will be bought online.

    That leaves furniture and white goods. Which will be bought at the warehouse stores opening up next to the supermarkets. Out of town.

    High Streets RIP.

    Repeat orders of white goods will be bought online too.

  • rate this

    Comment number 277.

    @Andrew Peston

    'It was exactly this kind of thinking in the 1980's that led to 10% of manufacturing companes going bust within 18months'

    Does anybody really shed a tear for British Leyland?


    Over-priced, unreliable, badly cobbled together pieces of garbage only kept 'competitive' by massive import tariffs on superior products or government subsidy.

    Same for British Coal, BT, BR etc.

  • rate this

    Comment number 276.

    I'm extremely knowledgeable/passionate about the product, as are all of my colleagues. Our stores aren't "run down", if anything they were overblown. This is a disgraceful response to an extremely high profile loss for the high street. The ramifications of this will be long and wide reaching. Do you all really want to conduct all your business online or in Tesco? If so, shame on you. Pathetic.

  • rate this

    Comment number 275.

    To be fair Will, Southport is a ghost town these days
    Liverpool is the nearest shopping hub to you and only a relatively short train ride/car journey away. Only problem is you have to put up with scousers once you get there.

  • rate this

    Comment number 274.

    Jessops sold £800,000 of vouchers before Christmas,which are now null and void I wonder how many HMV sold? People need to spend these and quick!

  • rate this

    Comment number 273.

    HMV was trying to be all things to all people,that will not work in an industry as diverse as music.I think it needs to move from the latest chart music as it will never be able to compete with the s'markets and amazon.It needs to move to neeche music where customers still like to browse,talk to staff or other shoppers to find music that is not shoved down our throats by his Cowellness

  • rate this

    Comment number 272.

    We have lost a steady customer for our printed T-shirt supply business. Enterprising bands and DJs do run their own merchandise but HMV was an iconic retailer who will be missed. The market demand (or lack of it) will determine where it's at.

  • rate this

    Comment number 271.

    real record stores and vinyl sales are thriving. With the demise of HMV perhaps people will go back to these stores. This will accelerate the demise of Blu Ray/DVD/Games but with streaming/downloads. However I believe there is still a place for buying music, sampling it and being led to other choices.

  • rate this

    Comment number 270.

    It's a shame the employees will lose their jobs but it's HMV's failure to move with the times. People want their music digitally - I can have all my music on all my devices with playlists that automatically synchronise - all my music is with iTunes Match in the cloud (although I can of course have a local copy on my computer as well if I want). When you use it you would not go back to CDs.


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