OK, so two of our bailed-out banks, RBS and Lloyds TSB have coughed up to provide ailing HMV with the £220 million urgently needed to replace the existing £240 million.
It's a very convenient time for this new finance to be put in place as according to a report in The London Evening Standard, "Bailed-out banks rescue HMV with £220m loan" by Nick Goodway and published on June 7th 2011, HMV were about to breach the covenants on the current facility.
Dinosaur or gem in need of protection?
It's ironic to think that when the first HMV shop was opened by Sir Edward Elgar 90 years ago it would have been at the forefront of music listening technology. Fast forward through the decades and it's the advances in the same technology that's left it floundering in the wake of the new ways of buying music.
For people of a certain age, thumbing through racks of vinyl was a real shopping experience and the sleeve designs, easily seen on the 12 inch album covers, added greatly to it. The demise of vinyl was caused by the emergence of the CD in the 1980's. This revolutionary breakthrough did however still allow music lovers the opportunity to at least look at and feel something tangible, and to proudly carry on displaying their collection. It also meant that the record shops still had something to stock.
The times, they are a changin'
It's not beyond the realms of possibility to imagine a music listening public in 50 years time that has never held a CD let alone a 33 or 45 rpm record. The Antiques Roadshow may well be inundated with collectors keen to have great grandfather's collection valued, or the mysterious eight track cartridge explained, but the download is here to stay. And even that will probably have been replaced by then.
Don't look back in anger
It's easy in hindsight to blame the HMV management for failing to spot the changes in trends but then again that's what they are there for. The acquisition of Waterstone's in 1998 has subsequently compounded the issue. With most of the world's books now available at a fraction of the price on a wireless tablet, thumbing through the latest Jeffrey Archer in the high street is another activity for history students of the future to wonder at.
Say hello, wave goodbye
Looking back, 2006 was a fairly pivotal moment for the management of HMV. For a start they were offered 210p a share by Permira but rejected it. The "City Spy" section of The London Evening Standard for Thursday 9th June 2011 reports those same shares were worth just 13p this week.
2006 was also the year that Tim Waterstone, the original founder of the bookshop empire, attempted to buy it back from HMV. He later withdrew his offer and one can only wonder if he suddenly realised the possible threat of new technology on sales of the printed word.
There's a hole in my bucket
The slowdown in sales and general uncertainty about the business obviously took the management back to the banks for support and those meetings must have been very interesting. The consideration to lend huge sums should be based not just on the numbers crunched by a highly paid "consultancy" but on management ability as well.
Flexibility in the marketplace, sensitivity to change and clear minds that know when something has had its day are key skills. A cynic might suggest that these negotiations must have been more akin to the plumbing supplies business convincing the bank manager that there was still a market for lead water pipes.
Sometimes you reap just what you sow
There will be many people who care little if another high street name disappears. After all it was the big boys flexing their muscles that saw off most of the independent retailers, including record shops, in the first place.
Jonathan Glauncey, on The Guardian website gives some grim figures. In the two years to November 2010, planning approval for 577 new supermarkets was given whilst 12,000 independent shops closed in 2009. The fact that one of the former big boys is now getting a corporate kicking from the new technologies will probably be greeted with smiles in some quarters.
Bend me, shape me
There are conditions attached to these new loans of course. No self-respecting banker would want to be seen to be just giving millions away and the quid pro quo in this case is the offloading of Waterstone's to Russian, Alexander Mamut.
Conditions and covenants give the banker a sense that they are pulling the strings but this has all the hallmarks of a delaying tactic. It is patently still not a good time to be writing off a large debt or sending a high street giant to the wall and some might suggest this loan restructure is just holding off the inevitable.
2,4,6,8, a little too late
With all that said, the management of HMV have finally had their eureka moment and linked slow moving stock to the advent of the download for both music and books. They plan to react accordingly and CEO Simon Fox has said that the new cash will allow them to press ahead with plans to convert 150 stores into a new format concentrating on technology like tablets, iPods and headphones.
All well and good but surely in their business plan, under the heading "competition" there must have been a long list of businesses already established and with a lot of market share in this industry? Apple and Amazon are just two that spring to mind.
How much is that doggy in the window?
In the early years, and for some time after, the HMV logo had 'Nipper' the dog staring down the speaker of an old gramophone. For the sake of nostalgia, not to mention the livelihoods of the workforce, let's hope it's the cynics and not the banks and HMV management that are barking up the wrong tree this time.
Sources.
- Goodway, Nick, "Bailed-out banks rescue HMV with £220m loan," published in The London Evening Standard Tuesday 7th June 2011.
- London Evening Standard - "City Spy" section published Thursday 9th June 2011
- Guardian.co.uk - accessed 8th June 2011
