HMV’s fate is set to be decided in the days ahead and, like Brexit, all the talk is about deal or no deal.
It’s been over a month since the last music chain went into administration and more than two weeks since the deadline passed for bids. With stores now getting low on stock of key releases, administrator KPMG will be reluctant to delay a decision any further and risk a drain on its own resources as music consumers look elsewhere and potentially lose faith in the HMV brand.
Suppliers have been providing HMV with new releases on a case-by-case basis. So while many indies are holding back stock from HMV – often a vital outlet for their releases – Sony Music UK has ensured Bring Me The Horizon’s new album Amo is available, a decision that’s paid off in sales terms.
Music Week has learned that a preferred bidder was set to be determined earlier this week, though the deal couldn’t cross the line. The physical entertainment retail sector had been primed for an announcement when KPMG’s rolling weekly arrangement with suppliers was up on Tuesday (January 29), but the administrator later secured another seven days to give the bidders another chance.
With the clock ticking, HMV’s fate looks set to be decided on Tuesday (February 5) or even earlier.
According to industry sources, the two leading bidders were High Street tycoon Mike Ashley and a management buyout led by HMV MD Neil Taylor. But Music Week understands there’s also a potential buyer in Sunrise Records' owner Doug Putman. Sunrise expanded from eight stores to around 80 when it acquired HMV Canada two years ago. Putman has reportedly arrived in London with lawyers in a bid to secure the deal.
KPMG has staged a “beauty parade” of bidders with music and movie suppliers. All the frontrunners would implement a restructuring programme and close unprofitable branches.
While the 130-store chain has performed ahead of the market in physical music, it was hampered by expensive leases and crippling business rates in some sites. HMV sold 31% of all physical music in the UK in 2018 – worth around £118.8m – but a projected decline of 17% in physical entertainment sales this year revealed the extent of the challenge ahead
Most suppliers are erring on the side of something new rather than more of the same
Industry source
While a management buyout would bring continuity, the industry might prefer the idea of Ashley or Putman trying to turn HMV around.
“I think most suppliers are erring on the side of something new rather than more of the same,” said one source. “But there are a lot of moving parts.”
KPMG has been talking to around 20 key suppliers, but there are also dozens of landlords each with their own agenda. Ashley, who owns Sports Direct and has bailed out of House Of Fraser, has reportedly been staging his own negotiations with landlords for a six-month rental holiday.
If a deal is not agreed this week, then HMV could go into liquidation. But Music Week understands that Putman would at that point move to negotiate directly with landlords and suppliers, who would be seeking to secure the return of stock that had been supplied on consignment.
While that might be late in the day for an audacious takeover, Putman could seize an opportunity to establish a presence in the UK. It remains unclear if he would seek to emulate the Canadian expansion of Sunrise Records in the UK via an HMV acquisition, or continue with the famous British music brand.
Sunrise has not responded to requests for comment.
“We are feeling more optimistic than we did,” said one source. “We know there are two main bidders, and in the event that isn’t successful there is someone [Sunrise] waiting in the wings.”
The industry would mourn the loss of a popular High Street name if HMV disappeared or was rebranded. Music Week understands that it’s the ownership of the HMV brand name that has complicated the acquisition process. While HMV Retail is in administration, HMV Brands Ltd – which controls the retailer’s name – is not. As a result, KPMG’s preferred bidder would need to acquire or license the brand name separately.
HMV Brands' company directors are Henry Foster and Paul McGowan of turnaround specialist Hilco, which operated the chain for six years up to Christmas.
Time is running out for HMV, which has already been in administration once before. One store, in Gloucester, has already announced its closure, according to local reports.
Other rumoured interested parties include French retailer Fnac and Amazon, although no details of any firm bidder have been issued. Previous interest from discount group BuyVia collapsed when it transpired it had not actually been in touch with administrators.
With the current problems at PledgeMusic, it’s not been a great start to the year for the physical music sector. ERA and the BPI have already led the calls for the chain to survive. While streaming may be the future, this week the biz will be united in hoping that the doors aren’t about to close for good on Britain’s last music chain.
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