The owner of UK sports retailer Sports Direct, Mike Ashley, has made a bid for entertainment retailer HMV that could see him add the company to his growing collection of troubled high-street businesses.
Ashley has been confirmed as one of “several” parties that have put offers in for HMV according to reports yesterday.
KPMG, which was appointed HMV’s administrator after it collapsed last month, has so far declined to comment, while Sports Direct has not officially confirmed either.
In the past six months the billionaire owner of football club Newcastle United has used Sports Direct — in which he owns 60% — to buy both the House of Fraser department store chain and Evans Cycles out of administration. Sports Direct also owns big stakes in fashion chain French Connection and department store Debenhams, where he recently ousted the department store’s chairman and chief executive from its board.
It is not clear at this stage whether Ashley was preparing to buy HMV through Sports Direct or another corporate vehicle. The tycoon is understood to be in discussions with music and entertainment industry suppliers to HMV in the past two weeks about the potential acquisition.
HMV filed for administration for the second time in six years in December. The group, which has 125 stores, has been hit by sweeping changes to people’s listening and viewing habits that have led to sharp declines in sales of DVDs and CDs. After it first entered insolvency proceedings in January 2013, HMV was snapped up by UK retail restructuring group Hilco Capital, which gained control of the music chain by buying up its bank debt.
Upon HMV entering administration for the second time, Hilco and HMV executive chairman Paul McGowan said the retailer had not been able to withstand the “tsunami of challenges facing UK retailers over the past 12 months on top of such a dramatic change in consumer behaviour in the entertainment market”.
RPA Perspective The shift in music habits from buying albums to streaming singles is frequently named as one culprit for the retailer's woes — including by HMV's most recent owners, Hilco — but others have weathered the arrival of digital content with more success. That includes Waterstones, which last year posted annual profits up 80%, and was owned by HMV Group until 2011, when it was sold off to Russian billionaire Alexander Mamut for £53 million.
Paul McGowan, executive chairman of HMV and Hilco, said at the end of December that Christmas sales of DVDs were down 30%. He pinned some of the blame on business troubles on a "general malaise" of the high street as well as higher business rates, but said the market for DVDs and Blu-rays was deteriorating rapidly "as consumers switch at an ever increasing pace to digital services". He added that "the switch to digital has accelerated dramatically this year creating a void that we are no longer able to bridge".
Netflix has 137 million subscribers globally, and is predicted to overtake Sky in the UK this year with a predicted 9.78m subscribers; last year John Lewis stopped selling DVD players, with Mintel data showing only half of UK homes still own a DVD player. Spotify last year topped 87m global subscribers. RIAA figures show streaming made up 75% of US music revenues in the first half of 2018, with digital downloads supplying 12 per cent and physical media just 10 per cent.
Ebook sales have pinched bookshops, as has pressure from Amazon, but digital sales have stagnated at about a fifth of overall sales. Bookstores have the equivalent of the Google Play store to contend with, rather than Netflix and Spotify, too. "What we're seeing is a very fundamental change in watching video and listening to audio, that it is streaming or digital completely," says Rajesh Bhargave, assistant professor in business at Imperial College London.
Waterstones brought independent bookseller James Daunt on board as CEO, an ex-banker famous for his stunning stores. Daunt says that investing in shops themselves was key to drawing book lovers back through the doors. "I think the crucial thing is that you're able to make your shops demonstrably attractive places in which to be," he said. "All the cliches around social enjoyment of shops is absolutely right."
