HMV’s administrator Deloitte is attempting to pay rock-bottom prices to buy up the CDs, DVDs and video games provided to it under a loan arrangement, in a move that is being resisted by some suppliers.
Before HMV went into administration, the entertainment retailer had agreed more favourable terms with suppliers, which meant it only had to pay for stock after it had been sold in stores. As a result, HMV is now stocking many thousands of video games, DVDs and CDs where the content owners – music and film companies – still retain ownership.
Deloitte first offered to buy up this stock – which runs to hundreds of thousands of music CDs and films – at 12p in the pound, according to two people close to the discussions.
But some content owners have complained that the increased offer is still significantly lower than standard retail deals of between 65p to 70p in the pound, the people said. Some content owners, however, including Universal and Warner Music, have accepted the higher offer and agreed to resume supplying the entertainment retailer.
The content owners are having to negotiate as they face little realistic prospect of repossessing their stock, which has been distributed to hundreds of HMV stores.
“The consignment belongs to the supplier but how are you going to get it back?” asked an executive at one supplier. “They have effectively got us over a barrel. Do you send bailiffs into the stores to look through the individual racks?”
The negotiations coincided with an announcement that HMV is axing 190 jobs – about a third of the staff at its head office and distribution network – as it seeks to cut costs.
Nick Edwards, joint administrator at Deloitte, said the cutbacks were “a necessary step in restructuring the business to enhance the prospects of securing its future as a going concern”.
He added that “the support received from suppliers has been very positive and has enabled us to continue trading during the administration”.
However, the redundancies caused some embarrassment for the company as disgruntled staff aired their grievances via the company’s official Twitter account.
“There are over 60 of us being fired at once! Mass execution of local employees who love the brand,” read one tweet from the company’s account.
Another read: “Just overheard our Marketing Director (he’s staying, folks) ask ‘How do I shut down Twitter?’”.
The tweets lasted for about 20 minutes before the company removed them.
HMV went into administration earlier this month, putting more than 4,000 jobs at risk across its national network of 230 stores. Hilco UK, the retail restructuring group, acquired the retailer’s bank debt last week, effectively giving it control and paving the way for its rescue.
Analysts and restructuring experts expect HMV to re-emerge but with a smaller network of stores.
Get alerts on HMV Group PLC when a new story is published