HMV Digital winds up its Hong Kong retail outlets as CDs and DVDs concede to the onslaught of online streaming media
- ‘HMV Retail was unable to escape from the crushing force of the wheel of history,’ said chairman Stephen Shiu Jnr
- All seven stores are closed and 80 employees dismissed
HMV Digital China Group, owner of the HMV music retail chain, is winding up its 25-year-old CD and DVD stores in Hong Kong, as the last remnants of the once-booming music retailing industry bows to the growing popularity of online streaming media.
HMV will put its HMV Retail unit in provisional liquidation to manage its assets, the company said in a stock exchange filing Tuesday. All seven of its stores were shut on Tuesday, and 80 employees dismissed, according to a person familiar with the matter.
The company was behind in rent and other payments, and is facing lawsuits by landlords and other creditors, HMV said. The company’s shares plunged 21.4 per cent after the announcement, closing the day at 1.1 Hong Kong cents, a record slump since they began trading on the GEM board in 2000.
“The company is under negotiation with the landlords of the settlement plans,” chairman Stephen Shiu Jnr said in an announcement. “HMV Retail has not been generating sufficient revenue to cover its own operating expenses and there is no reasonable prospect of making any significant improvement on its financial performance or operation in the foreseeable future.”
HMV, which can trace its history to London’s Oxford Street in 1921, entered Hong Kong 25 years ago and became the largest CD and DVD retailer in the city. During the heyday of Canto-pop in Asia, HMV was the place for celebrities to meet their fans. Mariah Carey, Boyzone, Backstreet Boys were among some of the stars who signed autographs or performed at an HMV store in Hong Kong.
Still, the store could not compete with the “digital tide” of online streaming as well as Apple’s Airpods, which sent sales of HMV’s bestselling earphones tumbling, said Shiu.
“Suffering from operational difficulties, HMV Retail was unable to escape from the crushing force of the wheel of history,” Shiu said.
Signalling the huge changes afoot in the music world, Hong Kong Records, another major CD and DVD retailer, closed its flagship shop in Pacific Place in June. The company still has a shop at Harbour City.
Two weeks ago, HMV said it was considering liquidating its retail units after its landlords in Central, Causeway Bay and Kowloon Bay filed separate lawsuits to claim HK$5 million in unpaid rents.
Music lover George Lau represents the wave of shifting tastes that hit HMV, which he used to visit often.
“Now I use streaming Spotify and Apple iTunes to digitally download thousands of songs and create different playlists,” Liu said. “I also have subscribed to movie streaming services from Netflix, which allows me to watch many movies and TV shows around the world. It is more convenient than buying CDs or DVDs.”
Mydy Lai, a hairdresser in Central, recalled fondly browsing racks of CDs and DVDs at the HMV in Central.
“I now use my smartphone to listen to music and have no need to buy CDs. It is a shame to see it is winding up. HMV is a collective memory for our generation,” Lai said.
Louis Tse Ming-kwong, director of Hong Kong brokerage VC Wealth Management, said HMV would struggle to find a white knight to rescue it.
“While HMV is still a well-known brand, it represents a music and DVD retail that is a sunset industry already. Buyers taking over the business would need to change its business model completely for it to work,” Tse said.
In a separate filing, HMV said two of its subsidiaries are being sued by Lei Shing Hong Credit. The creditor has a claim on money owed from the sale of property by HMV’s subsidies, including a house and several parking spaces. A person familiar with the matter said Shiu lives in the home.
Wong Sun-keung and Janice Tsui Mei-yuk Janice, both of Vision A.S. Ltd, will be the joint provisional liquidators of HMV Retail to handle the assets, negotiate with the creditors and seek buyers.
Wong said the total debt of the company is about HK$40 million, while its assets, mainly CDs, earphones, speakers and other products are worth about HK$9 million. The provisional liquidators will keep these assets before a final decision is made about what to do with them.
“[T]he HMV Retail business in Hong Kong experienced drastic changes during the past few months,” Shiu said. “The HMV Retail business in Canada had closed all its 102 stores last year due to the impact of online streaming media, signifying the hardship in operating physical stores; and as HMV retail stores in Hong Kong faced the same shock in recent months, it became an inevitable decision for us to wind up the business.”
The group swung to a net loss of HK$18.81 million (US$2.41 million) in the three months ended September, from a profit of HK$1.85 million a year earlier. Retail sales fell 41 per cent to HK$31.55 million, according to the exchange filing.
In 2013, British HMV was taken under the management of a court-appointed administrator. AID Partners, a private equity firm directed by local businessman Kelvin Wu King-shiu, took over the Hong Kong unit and its seven shops across the city.
Shiu’s company was originally called China 3D Digital, which produced films and managed artistes. In 2016, Shui bought HMV’s retail music business for HK$408 million from AID Partners. At the time, Shiu wanted to turn HMV into a lifestyle business model, with restaurants for customers as well as earphones, speakers, and toys of characters from Star Wars, Batman and Superman and other movies. The film and artist management business will not be affected, Shiu said.