Monday, April 11, 2011

HMV to be given support by other stumbling, failing giants?

The BBC Business News on Today was just reporting that "record companies" were going to try and keep HMV afloat.

The image is one of the drunk in the back seat leaning over to try and help the drunk in the front seat steer a bit better.

Obviously, the labels aren't talking about giving HMV money - only a crazy person would do that. This weekend's Observer had asked HMV investors about the possibility of them protecting their investment by pumping in more cash, and got this response:

One shareholder said: "It is questionable whether HMV has a business model that is sustainable, and we would need some convincing to support a cash call." Another investor said: "Everyone is asking the same question: 'Would we be prepared to throw good money after bad?'. Fox would have to undertake the mother of all charm offensives to persuade the City a rights issue was a runner."
Even George Osborne, who appears to understand finance less than anyone else over the age of sixteen, has kicked the sickly body round a bit:
"An industry has sprung up and it has quite an impact on high street music stores and I think that is unfair," he said. Quite right. Sue MacGregor, the BBC broadcaster chairing the conference, then remarked: "But it is too late to save HMV, though, perhaps?" The chancellor replied: "Unfortunately that is the case."
Curious, though, that Osborne thinks that his tax changes to try and close the tax loophole which allows Amazon and others to sell CDs without paying VAT if they ship them from the Channel Islands won't help HMV. So was this a move designed to help the already not-that-disadvantaged supermarkets, the only other companies flogging this sort of item in any numbers? Or, as we suggested at the time, does Osborne know the mild change to the cut-off point where VAT kicks in on imports is a pointless piece of gesture politics that makes no difference at all?

So, the record labels are going to "help" HMV, but they're just talking about changing the terms of supply for CDs. Not cheaper, just longer repayment times. Because HMV needs a bit more debt on its books. A bit more on sale or return.

These ideas seem to be bubbling up from people who haven't set foot in an HMV since the mid-1980s. It would be like trying to prop up a greengrocers by focusing on the supply of the draft vinegar. HMV isn't really selling that many records at all right now, having shunted those embarrassing old things to a corner to make room for DVDs, t-shirts, games and god knows what other vaguely-entertainment themed products they've loaded in over the last few weeks.

And HMV is drowning in the debt from its rush to buy cinemas and venues and - did I dream the HMV Camera Obscura? I think I probably did, but can't be sure. HMV's ill-funded dash into everything but CDs shows that even a company grabbing at anything doesn't see escape there. It seems unlikely that making it a bit easier for them to stock a product they don't really want to sell is going to turn the company round.

Although it might be good news for their Fopp stores.

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