Monday, January 23, 2012

HMV gets chance to limp on for longer

HMV has delayed the inevitable by doing a deal with some entertainment companies which sees some of the risk of supplying records and DVDs shift from the beleaguered retailer to the beleaguered labels:

The retailer plans to hand 2.5% of its equity to major suppliers in the form of warrants. Other terms of the alliance are to remain confidential but they are believed to formalise a switch of risks to suppliers at the store chain.
You'll recall part of the problem HMV had to grapple with last year was difficulty in getting credit insurance for the massive piles of stock cluttering up its shelves; this move will help with that.

It does appear to signal another change of direction at the whirling store, though:
. It is not thought to include games console suppliers, leading to immediate speculation that HMV may choose to refocus its product mix, expanding film and music and down-playing games. Shops are also expected to accelerate plans to resurrect vinyl offers.
All that money spent on turning stores into youth club style games drop-in centres was well spent, then.

The trouble for HMV is that not a single person is going to say 'hmm, I hear the discs on sale there are now directly underwritten by the manufacturer rather than a third party insurer; I really must pop into HMV'.

It might make the margins a little more comfortable, but a larger theoretical profit on stuff that has no customers to buy it won't help.

The best hope for HMV is that this will at least give them the cover to keep going until there's an upturn in the economy. Good luck with that.