HMV failure shows limits of consumer sentiment

LONDON Tue Jan 15, 2013 6:29am EST

LONDON Jan 15 (Reuters Breakingviews) - For business historians, the disappearance of HMV would mark the end of an era. The British CD and DVD retailer has called in administrators after years of vainly battling the Internet. A buyer may yet be found for some of the stores, but new technology has basically doomed this business, which can be traced back to the 1890s.

The brand - originally His Master's Voice - was once part of a successful industrial and artistic business. That lineage has not disappeared entirely. The manufacturing arm vanished long ago, but the EMI music business is still going reasonably strong. The remaining HMV retail empire failed to adjust to the shift from physical to electronic delivery of music.

Perhaps HMV could have thrived if its managers had been more imaginative or less diverted by an expansion into the almost equally threatened book trade. Perhaps its financial history was distracting - running as a highly leveraged company before its 2002 flotation and fending off a bid from private equity in 2006.

But most likely, nothing would have helped. As Amazon and others advance on the Internet, some physical retailers lose. Stores selling discs are on the front line, since discs are easily put in the post and their content can be downloaded with no inventory or shipping costs. HMV tried to change its product mix, but retailers trying for a transformation are especially unlikely to succeed in the UK, where high street rents are particularly expensive.

The HMV bankruptcy is calling up a stream of sentiment in the UK. Music moves hearts and souls, and trips to HMV played a central role in many adolescences. But such feelings are nowhere near enough to make a retailer's cash flow positive.

(This story corrects flotation details in paragraph 3)

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own) For previous columns by the author, Reuters customers can click on

(Editing by Chris Hughes and David Evans)

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