HMV faces closure due to ‘dramatic change in consumer behaviour’

2,200 jobs are at risk as UK high street retailer HMV once again faces administration, reporting "unsustainable" market conditions.

Following unsuccessful talks with its suppliers, the music, DVD, and games specialist retailers filed a notice at the end of December that it intended to appoint administrators (thanks, GI.biz). Stating that the DVD sector had declined 30 per cent over the festive period, HMV chair Paul McGowan said that while HMV "performed considerably better than that, such a deterioration in a key sector of the market is unsustainable".

"HMV has clearly not been insulated from the general malaise of the UK High Street and has suffered the same challenges with Business Rates and other government-centric policies which have led to increased fixed costs in the business," McGowan said. "Business rates alone represent an annual cost to HMV in excess of £15m. Even an exceptionally well-run and much-loved business such as HMV cannot withstand the tsunami of challenges facing UK retailers over the last 12 months on top of such a dramatic change in consumer behaviour in the entertainment market."

The 97-year-old retailer went into administration back in January 2013, but was saved by Hilco – which already owed HMV Canada – after which the company moved away from expanding its consumer "experiences" and video game efforts, and instead doubled down on its position as a leading movie and music distributor. By April 2013, 141 stores were saved, protecting over 2,600 jobs.

"After what has been widely reported as a tough fourth quarter for retailers, HMV is not the only High Street name facing tough decisions right now," said Entertainment Retailers Association CEO, Kim Bayley. "It is a fast-moving situation and it is too early to say how it will end. What is clear is that following its first move into administration in 2013, HMV has enjoyed a remarkable turnaround and it is conceivable that this will happen again.

"The fact is the physical entertainment market is still worth up to £2bn a year so there is plenty of business there. For the sake of HMV’s staff, customers and suppliers, we are very much hoping HMV can turn things around again."

Interestingly, as Eurogamer reports, while the retailer refused to accept gift cards the last time the company went into administration, right now HMV is still accepting them.

At the time, Conservative MP for North Oxfordshire Tony Baldry accused the troubled retailer of theft. "I suspect, like every Member of Parliament, I have a number of constituents who bought HMV Vouchers or Gift Cards as Christmas presents, who didn’t have the chance to exchange them before HMV went into administration,” he wrote in an open letter.

"I understand that HMV was selling Gift Cards and Vouchers all through Christmas and up until the day they went into administration. That, of itself, must raise questions, in that way before they went into administration, directors and management must have known that the company was at very real risk of failure, and I think that of itself raises legitimate questions of, in those circumstances were the directors of HMV obtaining property by deception, i.e. offences against the Theft Act, in allowing their stores to continue to sell vouchers and gift cards, when they must have known that there was little prospect of those vouchers or gift cards ever being redeemed?"

The issue also prompted an angry Irish grandfather to take three games from an HMV store after staff refused to accept the gift vouchers he had purchased for his grandson for Christmas.