I had no sooner filed last week’s column about problems on the high street than I heard the news that HMV was about to go into administration. Given their far from exemplary behaviour the last time this happened there was a surprising outpouring of love.
Oddly this love mainly consisted of nostalgia for HMV decades ago and often included the mention of Woolworths too! It became clear quite quickly that much of this was in reaction to a very poor and inaccurate piece in the Guardian from somebody who didn’t even realise HMV also owned FOPP. “Thank you for the music, HMV, but we don’t need you any more” was the headline.
Artists and labels in particular sprang to HMV’s defence and then several of the bigger independent shops came out saying HMV’s demise was the last thing they wanted or needed. Ironically many of the supportive comments were as misguided as the Guardian piece. The key argument that is certainly true was that the fall of HMV and FOPP could lead to problems for distributors and indeed that would then cause issues for the independents, especially should there then not be enough business for the distributors to be viable.
Of course all this depends on what happens to HMV’s sales should they close. Certainly independents where available would pick up some business. Amazon and to a lesser extent other online sellers would benefit more. Some business would simply be lost but what cannot be accurately estimated is to what extent others will replace HMV and create sales.
So letting HMV go under would be a risk and not a clear cut risk so the industry would rather stick with what it knows than take a leap into the unknown. There is, however, a good chance that what might surface instead of HMV is a smaller but more secure and profitable scenario and one where hopefully staff that have lost their jobs may be re-employed.
The other thing that seemed to be ignored was that HMV wasn’t rescued after its last administration by a company simply looking to take over and own a chain of successful record shops. There were over 60 serious notes of interest and none of them bid for the company.
What eventual owner Hilco do in their ideal world is take over companies that have failed, turn them around and then sell them at a profit. However that is far too risky so they structure things quite legally so they are guaranteed to make money. At the core of this is that the failed company will pay another Hilco company a fee each year and this is exactly what happened with HMV to the point that it was reported one year that the fee due was twice the profit made.
The biggest problem, though, with a business being run like this is that they are not made profitable by spectacularly reinventing what is on offer for sale but rather by reducing overheads. Lower rents are negotiated, fewer staff are employed and better deals are gained from suppliers.
In Edinburgh they were lucky in that their Princes Street store was so large that they were confident the owners wouldn’t be able to find another tenant so were paying a fraction of what the full rent should be. What they didn’t allow for was that the owners would get so fed up they would sell the building instead.
A classic example of cost-cutting was when Hilco found out supermarkets no longer had to pay for stock that was stolen and demanded the same terms, which they got from the record companies. With no need to worry about the cost of theft they simply dispensed with the vast majority of their security staff.
Of course even Hilco don’t always have the upper hand, which is why they failed to open a large FOPP in Brighton and lost their best HMV site as Brighton landlords have no need to offer any incentives.
Back to those distributors that the current argument hangs on. Yes the independent shops have a genuine concern that in a worst case scenario they may have problems but there is one of those elephants in the room that I’m so fond of. Those very record labels and artists that sprang to HMV’s defence are the very people who have taken a massive chunk of business away from distribution by selling directly themselves.
On a limited vinyl run, for instance, a label can sell more than all the independent shops put together. This impacts both on the distributors and the independent shops that used to cater for an artist’s fanbase. On the other hand HMV and Amazon sell the vast majority of CDs to the more casual fan so HMV would indeed be a loss, especially to bigger independent bands on bigger independent labels.
Essentially what we have here, to keep the cliches rolling, is an ever smaller cake that more people are taking a cut of and if like the distributors all you do is sell cake then that can only lead to trouble.
Shops the size of most HMVs were only viable in the first place with healthy sales of DVDs and that market certainly has less of a future than music. Certainly a smaller chain of stores selling just music and related items should be feasible and even better if they sell used and collectable items too. FOPP dabbled briefly in second hand but it was all governed from head office rather than on a shop by shop basis as is needed.
There was much talk last time that whatever happened there had to be a level playing field for HMV/FOPP and the indies and that went out of the window as soon as Hilco took over. Hilcoo’s modus operandi is to give themselves an advantage. The indies may need to worry more about a new HMV set-up being given even greater advantages.
One pundit summed it all up well. “HMV may well have to face closing all of its shops or even worse being bought by Mike Ashley!”
Shops are still best for new artists
While artists and their labels concentrate on an established fanbase and HMV and Amazon cater for the casual fan it does feel like there is scope to attract more interest for artists at all levels.
There is still the problem that younger potential fans may never go further than listening on Spotify and watching on YouTube but surely it has to be worth a try.
It is something that I’ve looked at for some time for Avalanche but really it needs a very large footfall or great amount of traffic for a website to work. Even Amazon have struggled to break new artists, possibly because the best combination is to play the music, have knowledgeable staff and then have the stock on hand to buy and that can only be done in a shop.
The display Avalanche had at Waterstones to coincide with the Rip It Up museum exhibition only convinced me more so hopefully it is something that we can try again in the future.
In search of city centre residents
There was much talk about “Edinburgh city centre residents” last year and I’m sure this year won’t be any different. What really needs to be established is how many residents qualify for this title and their demographic.
I’m not sure what is already available but certainly there seems to be no firm agreement on figures and make-up. Hopefully the necessary data is already available in one form or another and just needs to be collated.
It does feel sometimes that small interest groups hide behind the city centre residents title and it is certainly important that the council get an accurate idea of residents’ views.