Within the record industry, one topic of debate this week since HMV went into administration on Tuesday has been the impact the collapse of the retailer could have on the labels and distributors, especially in the independent sector where margins are much tighter and a sizable crisis at one big company can take others to the brink too.
There are both short and long-term issues, of course. In the long-term, if the HMV store network was to disappear from the high street completely, or if the HMV chain that emerges from administration is significantly smaller, it will mean the closure of a key channel through which labels have been able to sell to consumers.
And that would likely hit indies, or at least those labels with less mainstream releases, harder, partly because their stock is much less likely to be picked up by the supermarkets, and partly because they can’t afford the kind of high profile advertising that can drive consumers to Amazon et al. Though, of course, if a stronger independent record shop network could emerge from the collapse of HMV, that could aid independent and niche artists, who generally receive more support from indie stores.
But of more concern this week will be the short-term impact HMV’s fall could have, ie how many labels and distributors will be left out of pocket as a result of unpaid bills or lost stock. Most labels will be bracing themselves to take a financial hit as a result of HMV going into administration, though most distributors insist that the hit will be relatively modest because the flagging retailer’s collapse has been such a long-time coming, and suppliers altered their arrangements in the last year to mitigate risk.
In a blog post on the HMV situation yesterday – which also includes some interesting insights into how the retail firm treated smaller labels and distributors in the past and more recently – a rep for indie distributor Kudos said: “I would like to reassure our labels that, although this collapse certainly will have repercussions on the wider music marketplace (especially in terms of removing competition), Kudos will probably walk away reasonably unscathed”.
They go on to explain: “We recently moved across to consignment terms with HMV which required that we buy-back our in-store stock, leaving a large credit on their account. Our consignment terms also included swifter payments, so our debt exposure is pretty limited. There is an issue with stock, in that all Kudos stock on HMV’s shelves belongs to Kudos and under the terms of our agreement we have the right, now that they are in administration, to receive all that stock back. We are working on this and will keep you posted”.
Echoing the Kudos statement, Mike Chadwick, MD of label services business Essential Music & Marketing, also reckons that, because no one was really that surprised by HMV’s administration, the knock back on its indie suppliers will be less severe. He told CMU: “Contrary to the doomsayers, this is far from a killer blow for the independent distributors and their distributed labels”.
He expanded: “We’ve obviously been aware that this was a possibility and, whilst it’s very sad indeed, we’re not as exposed as we might have been. Certain key releases have been supplied on a consignment basis and we’ve been paid up to the end of November for those sales. So yes, there is a cashflow issue, but it certainly isn’t going to significantly affect our business, or the majority of our distributed labels. Hopefully a leaner HMV will emerge from this, one that can trade profitably and once again become an exciting destination for record buyers”.