Monday 7 January 2013

HMV: the song-writing on the wall?

Given the probability of weak Christmas sales, leading to a breach of its banking covenants, a fall in market capitalisation from £1bn to £10m, and a net debt of £176m preventing it from investing in belated development of multi-channel access to the consumer, perhaps HMV is in need of a radically different business model?

This initiative could be driven by a supplier-base that cannot afford to allow a customer with 20% market share of UK music sales to fail.

Essentially, HMV has become a suppliers’ show-rooming retailer, establishing physical presence and price points for products that are subsequently purchased online, elsewhere.

Staffed by music and entertainment enthusiasts that could explain and demonstrate product, the outlets could perform an invaluable merchandising function, like other specialist retailers provide in the toys category, with the added benefit of some direct sales where possible.

At a total cost of HMV’s current market capitalisation of £10m and combined backing for the £175m debt, competition authorities permitting, a consortium of suppliers could buy the company and convert it into a joint-merchandising/show-rooming vehicle, funded in part from advertising and promotion budgets.

Alternatively, why not let HMV go down the tin-pan, and allow price to be the only driver of sales in entertainment…..?

(How it has come to this)

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