M+E Daily

By Paul Sweeting

January has been a brutal month for Britain’s high-street media and entertainment retailers. In just the first 16 days, three major brick-and-mortar chains have either gone into administration (a form of corporate bankruptcy similar to Chapter 11 in the U.S.) ore shuttered their stores altogether, laying off thousands of employees in the process. A fourth retailer, supermarket chain Tesco, is lost its entertainment chief.

The first chain to fall was Jessops, the 78-year old photographic chain, which went into administration and closed 187 stores on January 9. One week later, the 92-year old HMV also called in the administrators, leaving the fate of its 238 stores worldwide uncertain.  Two days after that, Blockbuster U.K. called in administrators to begin winding down the 528-store chain after its U.S. parent company, Dish Network, failed to find a buyer. Meanwhile, the former head of entertainment for Tesco, Rob Salter, stepped down after two years on the job.

While the particulars of bankruptcies vary, all the chains were being squeezed by the forces of shifting consumer behavior toward online shopping and digital entertainment, and a long, punishing recession that has battered British retail and business generally. According to research firm Conlumino, 73% of all music and video sales in the U.K. are now made online, compared to 6.5% a decade ago. The rapid growth of streaming services, from Pandora and Spotify to Netflix and LoveFilm has also undercut sales and rental of physical media, just as they have in the U.S.

British retail generally is also suffering a prolonged downturn as consumer spending has contracted since the global financial crisis in 2008. Unemployment in the country is expected to reach 8.3% this year, according to a forecast by the Organization of Economic Cooperation and Development, while the overall economy is only expected to squeak out growth of 0.9%, after falling 0.1% in 2012. Consumer spending has been further hurt by fiscal austerity measures adopted by the government, which the International Monetary Fund estimates will suck £76 billion (U.S. $122 billion) out of the British economy by 2015, knocking 8% off GDP over that time.

The implosion of the M&E chains, meanwhile, has left disarray in its wake. The collapse of HMV has left suppliers wondering if they will ever collect on as much as £40 million ($64 million) in outstanding receivables, while Universal Music also could get stiffed on leases it holds to some of the chain’s properties dating to Universal’s acquisition of EMI. The chain is also being accused of theft by members of Parliament for continuing to sell gift cards and vouchers when it new bankruptcy was imminent and there was little chance customers would ever be able to redeem them.

Staffers at the 16 shuttered HMV stores in the Republic of Ireland have also staged a sit-in, demanding payment for wages owed and accrued time off and sick leave. HMV employed about 300 people in Ireland, and has about 4,000 staffers in its 223 U.K. stores. Blockbuster employs about 4,200 in Britain, while Jessops employed 1,370 before closing.