Needs an accountant: HMV and EMI

HMV has had a store on Oxford Street in London for 96 years.

The composer Edward Elgar opened its first Oxford Street store in 1921, when the company was known as His Master’s Voice, and sold gramophones, sheet music and records released under the HMV label.

At the time, the brand was at the forefront of the music industry. A decade later, the brand merged with the Columbia Gramophone Company, forming EMI.

The start of The Beatles

The two brands, EMI and HMV, would dominate the British music industry for decades, one handling music production, and the other selling music to consumers.

They are indelibly linked to UK music history – The Beatles used the in-store studio at HMV Oxford Street to record a demo, which ultimately got them signed to EMI. At the time, this was a huge gamble – nobody in the record industry felt ‘guitar music’ had a future – but it paid off in spades.

The rise and fall

In 1984, HMV moved into a new flagship store on Oxford Street, minutes away from the old one. It was then the biggest record shop in the world. HMV’s star continued to rise in the 1980s and 1990s, but the seeds of its downfall were sown in 1998, when EMI spun on HMV as part of HMV’s merger with book chain Waterstone’s.

The connection between record production and record distribution had given both brands a competitive advantage in the preceding decades. Now they were going it alone in a
rapidly changing industry. Neither brand had done enough to protect itself from the digital music revolution.

EMI made a huge mistake when it sold off consumer electronics company Thorn, leaving it reliant solely on records to make its money. “So EMI was left exposed by the idea that, as long as records kept selling, it would continue to be profitable,” Brian Southall, author of The Rise & Fall of EMI Records, told a US radio show.

A slow decline

The label experienced a long, slow decline throughout the 2000s, as album sales fell, and it was purchased by private-equity company Terra Firma in 2007. By 2010, huge
artists, such as Paul McCartney, were jumping ship and, in 2011, the label was taken over by Citigroup.

The bank lost £800m, and Terra Firma £1.5bn. Terra Firma ended up suing Citigroup for ‘misleading’ it over the deal.

Terra Firma lost in the US, and is still pursuing its claim in the UK. In 2012, the label was broken up and absorbed by Universal Music Group.

Around the same time, HMV was struggling as it tried to play catch-up with digital music platforms, such as iTunes. In 2013, it appointed Deloitte as its administrator, owing millions to its suppliers – record labels, film distribution companies and videogame companies.

A symbol of UK music history

Restructuring company Hilco bought HMV’s debt from its lenders, and then organised a deal that allowed it to save the HMV brand, and keep 141 out of its 222 stores.

The company’s modern Oxford Street outlet was gone, but Hilco restored its original 1921 store, complete with its old neon sign. HMV has lived on as a symbol of the UK’s musical history, rather than the innovator it once was. So it’s perhaps fitting that HMV expects 2017 to have been its biggest year for vinyl music sales since the late 1980s.

This article appeared in Jan/Feb 2018 issue of AT magazine and Spring/Summer issue of 20 magazine.

Mark Rowland is the Editor of Accounting Technician.

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