When Deloitte was recently called in to act as administrator for HMV, just after the collapse of Jessops and Blockbuster, it seemed as if another log had been added to the bonfire consuming the British high street.
But while the fate of the store is still far from certain, the decision by restructuring firm Hilco to purchase the bulk of HMV's debt - giving it effective control of the business - suggests that some, if not all, of the business could pull through.
The retailer's demise was predicted frequently and loudly, and the company itself warned in December that it was likely to breach financial agreements with its banks. Even before then, it was widely reportedly that the business was being propped up by key suppliers such as EMI, Universal and Warner Brothers, who accepted shares in the retailer in exchange for more favourable trading agreements. They were said to be desperate to keep alive an outlet which could compete with online businesses such as Amazon and the mass retail models of supermarkets, both of which deliver only slender profits to their suppliers.
A failure to adapt to the new realities of entertainment retail has been widely accepted as the main reason behind HMV's failure. Ajay Bhalla, a professor of Global Innovation Management at London's Cass Business School, said: "Not only did HMV fail to wake up to the reality of the shifting retail landscape from high street to online in the late 1990s, it also failed to transform its business model when new players entered the market. While relying on the high street to generate its cash flow, it never made a serious attempt in generating new revenue streams. For instance, it failed to strike partnerships with emerging platform providers, and made no attempt to challenge its status quo."
However, there is hope that Hilco's debt buy-out will enable the store to refine its business model and return to competitiveness. The firm specialises in purchasing troubled businesses such as HMV, and is estimated to have taken on £60 million of HMV bank debt, though it is likely to have paid less than this for it. A statement from Hilco said that the company "believes there to be a viable underlying HMV business and will now be working closely with Deloitte who, as administrators, are reviewing the business to determine future options."
Hilco bought the Canadian arm of HMV in 2011 for £2 million, which still trades today. They managed to strike favourable deals from suppliers to support the business and, prior to the current deal being confirmed, it was hinted that they would be willing to do the same in the UK. The actions of recent days by Deloitte also seem to indicate that they expect at least of the 230 stores to keep going, as they reversed their decision to forbid HMV stores from accepting outstanding gift vouchers, which are estimated to be worth some £7 million. This decision implies that the business is expected to survive long enough for customer goodwill to be of value.
However, the involvement of Hilco is far from conclusive proof that HMV will survive. In 2009 its purchase of defunct bookseller Borders saw many stores sold off and the business still closing, shedding hundreds of staff, after only another five months. They were also involved in the closing down of Woolworths in 2009 and doomed supermarket Somerfield in the same year; as its business model centres around maximising returns from distressed businesses, whether in the short or long term, Hilco's involvement is no indication of sanctuary for HMV. While it's been given a reprieve, His Master's Voice may yet fall silent before the end of its 92nd year.