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Blockbuster follows HMV into administration

Rarely a customer of HMV and never of Blockbuster, do I still have insight into their administrations this week?

Content is king and optical storage media have little emotional appeal. Why not get music and video from hard drives and broadband? Most TV seems to come to me via Tivo and - apart from some treasured vinyl - DAB and streaming should suffice for audio. Even the car player is hard disc based.

No one should have been surprised about HMV or Blockbuster. Their markets moved and they did not.

Are there more such failures to come? I'm no seer, but EE's high street closures are not a shock when one considers the saturated mobile phone market.

What I think is a problem is the lack of finance available to small businesses generally in the UK. Too small to attract fresh equity and similarly too small for the banks to invest in lending to (and, even with £millions of turnover, sufficiently small to be reluctant to invest a sizeable proportion of their limited funds in seeking professional advice early enough to ensure that a real difference can be made) many can no longer service their debt. The banks forbear, rolling minimal interest payments and extending terms (the "extend and pretend" approach) and the businesses become zombies, unable to create value or profits for want of debt or equity investment, but continuing without hope of recovery.

For such companies insolvency would be a blessing, ending their sterile existence. More valuably their resources could be recycled, if only the banks would be less fearful of recognising the losses on their balance sheets and their political masters would be less fearful of banks taking such losses.

Acknowledging that such a bold step would be in the interests of insolvency practitioners, I would nevertheless welcome such reform.

 

 

Date: 17th January, 2013
Author: Chris Laughton

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