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Blockbuster follows HMV into administration

Date: 17th January, 2013   |   Author: Chris Laughton   |   Comments: 2

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.

 

Discussion and Comments

By Vernon Holgate on Friday 25th January, 2013

Spoken like an accountant.

I take your point about Blockbusted but I liked HMV and they were web enabled as well; so for people like me who like a visceral experience and for accountants who are too tired to want to go to a shop, they had something. I think they will come back and perhaps not saddled with so much debt and maybe the landlords will be sensible about lease pricing.

Kind Regards

By Chris Laughton on Friday 25th January, 2013

Vernon

With Hilco planning to use the Jessops brand as well in HMV stores, your experience will be enhanced!

This illustrates a point about insolvency that applies equally to the zombies and to the truly bust: using an insolvency procedure to recycle resources facilitates investment and allows value to be created.

Chris

 

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