Why HMV and the vinyl revival are just delaying inevitable and important decisions about the future of high street music retail

When HMV and FOPP went into administration in January 2013 it should have been a watershed moment. Nobody was sure what would follow but it was clear that HMV’s model was unsustainable and no amount of tweaking would put it right. What was not expected was that eventual owners Hilco would turn this fact into a powerful bargaining tool. All the Edinburgh HMVs were to close and many commented this would leave the way open for Avalanche. I did however always fear the worst. Somebody would buy the FOPPs for sure and the extent to which they would be competition would depend on the new owners. If HMV resurfaced it would probably be in a smaller, different location. Again the new owners would be key and quite possibly diferent to the owners of FOPP.

Hilco the turnaround specialists now owned the debt and ruthlessly announced the closure of shops that were making a loss which was most of them. It left the question as to whether the rump was sustainable and who would buy it. There were over 30 serious notes of interest but come the day nobody made an offer. The consequences of this were not immediately obvious but soon the picture became clearer. Hilco were approaching record companies and landlords with a simple message. HMV is fucked. Nobody wants it. Maybe we can turn it around but we can’t be paying market rents or indeed be paying for stock at all until it is sold. Shopping centres in particular panicked and offered them a year rent free to sort things out. With most  high streets having empty shops only a few landlords could be sure of getting new tenants. And so the new HMV model was born. Pay as little rent as possible and take no risk on stock only paying for it once sold. Discovering supermarkets no longer paid for stolen stock Hilco demanded that too and then promptly dispensed with security !

In Ireland where there was much ill feeling about the closures including sit ins HMV would also return and soon after took over Xtra-vision where the DVD stores could also stock HMV product. It seemed a crazy move but surely Hilco had a cunning plan ? In the UK record companies and most landlords capitulated knowing that Hilco were not bluffing about closing HMV down if they didn’t get the terms they wanted. Hilco had closed down Borders after a matter of months so their reputation went before them.

So independents were put at a massive disadvantage after all the talk had been of the need for a level playing field but there was something far more important in the medium to long term. Hilco’s model of “we are completely fucked” is a strategy that can only work for so long. They have had to leave key sites in Glasgow, Cardiff, Nottingham and elsewhere as landlords could get a better rent from others. Sure they can duck and dive and find somewhere cheaper but it isn’t exactly the most positive of strategies. They can argue with Tesco and Amazon about who is selling what but there is an inevitability that as time goes on they will sell less. HMV in the UK will make a profit if for no other reason than they close a shop as soon as it starts losing money. The problem for the long term future of high street music retail is one day they will simply make a business decision to get out of the market completely. They might be able to sell but who would be mug enough to buy a failing business and without the clout of Hilco. If anybody had any doubts the recent announcement of the closure of all their shops in Ireland on the back of closing down Xtra-vision should point the way.

As for vinyl nice as it is to see a resurgence it has, as with HMV, just delayed the inevitable. For HMV making a profit thanks to Adele CDs, low rents and favourably trading terms is not sexy. Profits due to vinyl sales and in-stores, no matter how small they are in reality, are “cool”. Vinyl only shops are not the future except in only the most niche of terms. Vinyl is not a fad but it is also not here to stay at the current levels seen and it will be abandoned as and when the bandwagon jumpers see fit.

If HMV had been allowed to go to the wall in 2013 something would have taken its place. Maybe somebody buys the FOPPs and expands the chain. Maybe Rough Trade implement the expansion policy that has so far seen them go no further than open in Nottingham and take over Rise in Bristol. Maybe record companies take over some shops. Universal looked at buying FOPP previously. Labels are already opening shops. Maybe several things happen but at least it wouldn’t have been the same old, same old.

Similarly if the vinyl revival had stayed at the level of a niche indie shop thing then record companies would have been forced to look at a way forward rather than wallow in the past. In 2013 there was a far better chance of new ways and businesses getting established. There is no saying if it would have been a better world for independents, it could easily have not been. Other Music in New York recently closed despite surviving longer than most including a massive Tower Records opposite but they were still taking half of what they used to. The challenges facing music high street retail are many but one thing is for sure and that is that HMV and vinyl are not the answer and instead are just delaying the inevitable. The vinyl bubble will burst in the next year or two. Second hand vinyl shops will I’m sure continue to thrive. HMV may duck and dive for a few years yet but eventually they will come up with a face saving story as to why they are quitting. By then it may be too late for something meaningful to take its place.