HMV entering administration was triggered by the current struggle of the retail industry, and now the company will find it difficult to recover in the current retail conditions. Uncertainty over Brexit has caused the value of the pound to drop, which has increased the cost of supplies from abroad. An increase in business costs and online shopping has also put HMV in jeopardy, making it harder for HMV to gain traction in the retail industry.
HMV needs to find a buyer that has the resources and ability to turn around a failing business in a declining industry into a profitable, sustainable company. Previously HMV was bailed out from the 2013 administration by Hilco Capital, a British international company that specializes in restructuring and refinancing other companies, particularly those that are under performing. This was a lifeline for HMV. Six years on and the company finds its self in the same position as before, except this time the physical entertainment industry has declined further and to bounce back would be even more difficult. Despite uncertainty over HMV future, KPMG has received several offers for company. However, the potential buyers’ intentions with the company remain unknown and they may rather use HMV assets to pursue other business opportunities.
A detrimental factor that has led to the demise of HMV has been the rise of the digital entertainment market. Platforms with unlimited music, film and entertainment all at the click of a button have replaced the need to go and buy a physical copy’s resulting in the rapid decline in the physical market. In 2017 a 5.4% decline in the global physical revenue generated by the music industry, continuing from a 4.4% decline the year before, caused margins to shrink further. On the other hand, digital revenue experienced a 19.1% revenue increase. HMV will not be able to sustain positive growth if it is to continue primarily selling physical music and entertainment products.