HMV in deeper water if record companies are manning lifeboats
N EWS THAT a posse of major record labels is saddled up and riding to the rescue of HMV looks good for the 4,350 employees of the troubled chain, but I wouldn't bet on it.
It's reported that a consortium that includes Universal and Warner is one of the frontrunners considering buying out the music and DVD retailer who went into administration in the UK, and called in the receiver in Ireland last week.
In the grand scheme of things, headlines about HMV refusing to honour gift vouchers were little more than a distraction as the music industry woke up to the very real threat that their last major retailer could go to the wall.
HMV's history dates back over 100 years, but record companies are not banding together in an attempt to bail out the chain out of benevolence or a sense of heritage. It's pure economics.
HMV's traditional model is one of the last fortifications against the wholesale discounting carried out by online giants such as Amazon and supermarkets like Tesco that results in poor returns for record labels.
Some have been quick to blame illegal downloading on the demise of HMV, but while piracy has undoubtedly contributed, it's not the whole story. With the rise of iTunes and similar sites, CD sales are down and falling rapidly and HMV has struggled to compete with online retailers and supermarkets for a slice of what remains of the CD market.
Hopes that DVD and ' boxsets' sales would make up for the music slump have all but disappeared with faster broadband and the growth of Netflix and other services.
It's easy to be wise in hindsight, but HMV were in some ways the architects of their own downfall. Clearly, the old idea of a record shop with library shelves of CDs, DVDs, games and books could not alone stem the tide as consumer habits changed, driven by the convenience and immediacy of online buying or downloading.
If HMV does sell, the new owners will have to think outside the box. Stores will have to offer something that can't be easily accessed online if they are to survive.
That's the challenge facing the consortium of record companies if they seal the HMV deal. Unfortunately, their track record on thinking outside the box doesn't inspire confidence.