Read the text about HMV and learn some language about Music, Business and Finance.
Do you remember the days when we used to buy records, tapes and CDs from music shops? For years HMV was the main music retailer on UK high streets. It was the cool place to go on Saturdays to listen to music and buy chart singles and albums. They also sold T-shirts with band names on and concert tickets. Later on, they moved onto selling video games and their stores were packed full of young kids playing the latest releases.
Times have changed though. Virgin opened up Virgin Megastores and attracted a lot of HMV’s customer. Then, digital music became common and people started downloading from the net at a lower price. Now, people no longer buy their products like before in shops, everything is online because it’s more convenient.
At the moment, HMV is feeling the effects of a summer sales slump and is fighting to stay open. They lost around £36m in Q1 of 2012 alone. Some experts think they will have to sell more unprofitable stores or go into administration. Another option is to cut running costs.
The majority of HMV’s profits are made at Christmas when shoppers buy music as presents. There is also the important number 1 single sales. Experts predicted a £10m profit for this year but HMV’s sales decreased by 10% over the summer. As a result, HMV’s shares fell by 40% and their future does not look good.
The biggest problem facing HMV at the moment is their £176m debt. To pay the money back they sold off Waterstones and their live music venues but it didn’t raise enough. Another bold move was to give equity to their suppliers such as EMI in return for greater access to back catalogues and the ability to buy on consignment. This has saved them lots of money as they only pay for what they sell.
Is HMV finished? FOR:
AGAINST:
So, what should HMV do next?
1) Sell off more outlets?
2) Sell more equity?
3) Take out a loan?
4) Develop more online sales?
5) Cut costs?
Music Vocabulary
- albums
- collections of songs released together
- back catalogues
- previous releases
- chart singles
- songs in the top 40
Business Language
- bold move
- an important decision
- feeling the effects of something
- to experience the result of an event
- fighting to stay open
- trying to survive
- sold off
- bought by someone else
Financial Vocabulary
- Q1
- First quarter
- buy on consignment
- an agreement so you only pay for what is sold
- cut running costs
- reduce money spent on the money needed to operate the company such as the rent and salaries
- equity
- shares
- pay the money back
- repay or return borrowed money
- stores go into administration
- to go bankrupt and be controlled by someone else to deal with the debt/financial problems
- summer sales slump
- low sales during the summer
- unprofitable
- not making money
