Monday 21 January 2013, 10:44 | By

HMV suppliers back Hilco rescue plan

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The big music and movie companies are reportedly backing one bidder in particular for the HMV business, restructuring specialist Hilco, which already owns the HMV Canada business.

According to various media reports this weekend, execs at Universal Music, Warner Music, Sony Pictures and 20th Century Fox believe that Hilco’s proposals to take ownership of the HMV UK company are the most credible, and are most likely to ensure a decently sized and commercially viable HMV business emerges from the administration.

As previously reported, HMV’s directors called in the administrators last Tuesday after failing to renegotiate terms on the firm’s sizable debts. Up to fifty parties have reportedly come forward interested in parts of the business, some interested in the retailer’s real estate, others in its 7digital stake, and others still in taking the HMV brand and operating a streamlined network of HMV stores.

While the big music and DVD companies refused to directly bail out the HMV Group by pumping millions of their own money into the firm (something the retailer’s directors proposed), and while last week execs at each of the music majors denied speculation that they might themselves bid for some of the HMV business, insiders say that bigwigs at the major music and movie firms are still hoping that a deal can be done to ensure entertainment products still have a specialist seller on the high street.

To that end, word has it that the major suppliers have been talking to Hilco about providing even better terms to any HMV that comes out of administration, better still than those provided to the HMV Group last year, which were already vastly improved on standard terms and arguably allowed the flagging retailer to last through the all important Christmas quarter. A Hilco-owned HMV may also benefit from a cut in wholesale prices and very favourable credit arrangements.

Such terms are forthcoming partly because the record and DVD industries want to retain a presence on the high street, which is particularly useful for generating impulse purchases from more casual consumers, and partly because they don’t want to become wholly dependent on the cost-cutting supermarkets and Amazon, the latter of which wholly dominates in the online mail-order space (especially now Play.com is shutting).

Though there are some, in the record industry in particular (where digital is already accounting for over a third of revenue, compared to 6% for home video), who reckon mainstream entertainment retail on the high street is ultimately doomed, even if a streamlined HMV can be sustained in the short-term, and actually labels would be better off investing in alternative routes to market, enhancing direct-to-fan sales of both digital and physical product off label and artist websites, and forging partnerships with other non-entertainment retailers, especially in the fashion space.

Some might also worry that giving ever preferential rates to HMV might further hinder the indie record shop sector, despite the fact that, once all experiments to keep an HMV type chain alive fail, it’s probably the independent retailers who have a more long-term future on the high street if given the right support from suppliers. Though, while there are realistic plans on the table to rescue at least some of HMV, and many reckon the Hilco proposals are realistic, the labels and DVD distributors are likely to do all they can to make those plans happen, aside from pumping in their own cash.

Elsewhere in HMV news, and staff at two of the retailer’s shops in Limerick have ended their sit-in protests after receiving assurances that they will all get the wages they are owed for work done in the last month plus holiday pay. As previously reported, while HMV’s UK stores are open as usual while administrators Deloitte try to save the company, in Ireland the receivers have been called in and the firm’s 16 shops have been closed. Staff at two Limerick stores refused to leave the company’s premises until they received assurances about owed salaries.

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