HMV: Retail vs Media

The media furore surrounding HMV has been overwhelming.

You can certainly understand why. A number of stores are to be closed, Christmas takings were lower than expected and credit limits are being reviewed. The last big music specialist is fighting for its life and for the national press it makes good copy.

Yet if you look at what HMV have actually said, you’ll see that the situation isn’t nearly as dire as the media will have you believe.

Certainly, HMV didn’t have the Christmas it thought it would. The firm blamed the snow and sources close to the company told me it had trouble with its internal replenishment system. But whatever the reason, HMV’s Christmas takings didn’t live up to expectations and as a result it had to warn its stakeholders.

In order to prove it is doing all that it can to cut costs, HMV announced it would cull 60 of its stores – 20 Waterstones and 40 HMV outlets. Almost all of these shops are loss-making or based near another store, but it was enough to get the press predicting the imminent demise of the entertainment giant.

‘HMV struggles to survive amid tumbling sales,’ read The Guardian. ‘Fears of future of HMV’ claimed The Sun. ‘Share crisis looms for HMV,’ said Gamesindustry.biz.

It was this sort of reporting that scared suppliers, clients and even consumers, and soon one insurer put the firm’s credit insurance under review. The BBC broke the story with the headline: ‘HMV: It gets worse.’

The very next day the biggest companies in the music world wrote a letter pledging their support for HMV. The BBC never covered it.

PR NIGHTMARE

As a public company, HMV has to announce when it’s not performing to the levels it expects. But there is an art to handling bad news, and HMV were perhaps a little too honest.

The firm is currently working hard to transform its business, but it’s doing it under the public eye and as the last real music specialist. If HMV falls it’s not just the demise of a retailer, it’s the death of the physical music market. And for the mass media, this is big news. Yet that doesn’t mean it has to exaccerbate it.

Of course, the stories haven’t all been about HMV’s fall. Shareholder Alexander Mamut is in discussions with a financial specialist to reorganise the business.

Speculation ranges from him buying the company (he’s already increased his share in the firm from 3.06 per cent to 6.1 per cent), to taking Waterstones and selling off HMV’s stores, digital business and live music division.

What Mamut is actually up to is anyone’s guess. But at least this press activity is on a potential saviour for the firm and not its imminent death. The retailer’s share price even rose off the back of the reports.

TOP DOGS

I’m not saying everything is rosy at camp HMV. The firm has been slowly changing its business over the last two years, focusing more on fashion, live music and digital. However, this transition has been slow-moving.

It’s important to remember that HMV’s cash flow is good, and the firm expects to post a profit for its current financial year. Meanwhile, the company’s top bods are in discussions with financers and banks on taking the business forward.

These execs have big ideas on what HMV will look like in three years time. A very different HMV to the one today. If only the media would leave them alone to get on with it.