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Business News Deals Labels & Publishers Retail
HMV deal saves 100 stores
By Andy Malt | Published on Tuesday 5 February 2019
So, if you ever want to predict who will own the HMV UK business next, turns out you just need to check who most recently bought the Canadian version of the company. Canadian music retailer Sunrise Records and its owner Doug Putman have swooped in and saved 100 HMV shops in the UK.
Toronto-based Sunrise Records previously bought the leases of more than 70 HMV stores in Canada back in 2017, after the owner of the Canadian HMV business – that’ll be Hilco – put the company into receivership. Hilco originally bought HMV Canada in 2011 and then, two years later, also bought HMV UK after it fell into administration. Over Christmas, Hilco bailed on HMV here, just as it had in Canada in 2017. Are you keeping up?
When Puttman acquired the 70 HMV stores in Canada they were subsequently rebranded in order to facilitate a national expansion for Sunrise Records. However, here in the UK, the shops that have been acquired by the Sunrise company will remain branded as HMV. Four Fopp stores will also continue to operate as they currently are.
In a statement, Putman said: “We are delighted to acquire the most iconic music and entertainment business in the UK and add nearly 1500 employees to our growing team. By catering to music and entertainment lovers, we are incredibly excited about the opportunity to engage customers with a diverse range of physical format content, and replicate our success in Canada”.
That business plan sounds quite a lot like the one pursued by Hilco since taking ownership of HMV UK in 2013. When putting the company into administration over Christmas, Hilco said that high business rates, slumping DVD sales and tough trading conditions on the British high street had made running the retailer as a viable concern impossible. But Putman presumably reckons that, if he can make a success of stores Hilco gave up on in Canada, why not in the UK as well?
Insisting he is optimistic about the future of high street entertainment retail, Putman added: “We know the physical media business is here to stay and we greatly appreciate all the support from the suppliers, landlords, employees and most importantly our customers”.
The deal will see 27 HMV UK stores close with immediate effect, due to high rents, meaning the loss of almost a quarter of the company’s workforce. A further 122 warehouse jobs will be cut in the coming weeks as well. However, the deal does save 1487 jobs, something that was far from assured when the company went into administration in December.
In a statement following the announcement of the Sunrise deal, the UK’s Entertainment Retailers Association said: “Today is good news for the UK’s entertainment industry. With significant experience in the music, games and video market and a successful track record of growth in Canada, ERA is confident that HMV staff, suppliers and customers are in great hands with Sunrise”.
“Sunrise recognise that on top of streaming and downloading people continue to buy physical formats, which is still a significant £1.8 billion business”, it continued. “HMV accounts for approximately a quarter of the physical music market and a third of the video market creating a significant opportunity for Sunrise in the UK”.
Meanwhile, speaking for the UK record industry, BPI boss Geoff Taylor said: “We are heartened that the large majority of HMV stores will continue to trade under the new ownership of Sunrise Records – a business with a successful track record in entertainment retail in Canada”.
“There is still a resilient market for recorded music on physical formats”, he went on, noting that last year they accounted “for over a third of all music consumption”. This is because, Taylor added, “fans value the collectability, artwork, liner notes and great sound quality of music on CD and vinyl. With new investment and the support of labels, HMV can continue to offer music lovers the pleasure of browsing and buying physical music on the high street”.
Noting how Hilco had blamed business rates as a key factor in its decision to bail on HMV, Taylor also mused: “We hope that government will play its part in helping to sustain important employers like HMV by reviewing the high levels of business rates that disadvantage physical stores compared to online traders. Meanwhile, we wish the new owners and the staff the very best as the chain heads towards its centennial celebration in 2021”.
A late bidder for the UK music retail chain, Putman only emerging as a contender over the weekend. Up until that point the favourite to buy the firm was Sports Direct owner Mike Ashley, who has acquired a number of other UK retailers on the brink in the last year. It was also thought that senior execs at HMV itself were considering a management buy-out.
Putman acquired Sunrise Records in 2014, after years of downsizing, installing himself as President and overseeing an expansion to nine stores, all within Ontario.
With the purchase of HMV Canada in 2017, it grew massively to a national chain. Sunrise’s focus is very much on music, seeking to stock a diverse range of releases, and more so than what HMV has stocked in recent times. Though, like HMV, it also sells DVDs and Blu-ray, some music-related electronics, board games, t-shirts and other small gift items.
It remains to be seen if Sunrise’s business model is sufficiently different enough from Hilco’s to keep the chain afloat long term here in the UK. However, for now, HMV remains on the high street, which is something pretty much everyone in the music industry will welcome.
