HMV Canada CEO Nick Williams on Bankruptcy: 'Younger Audiences Are Less Into Purchasing Music' (Exclusive)

HMV CEO, Nick Williams
Barry Roden

HMV CEO, Nick Williams

The chief exec discusses his attempt to keep the country's largest music chain afloat.

It's the end of an era for the music retail biz in Canada as the country’s biggest chain HMV goes into receivership and all 102 HMV stores close on April 30—if not before. 

About 60 of its 1,300 employees were let go Friday (Jan. 27), following the decision by the Ontario Superior Court of Justice to approve the reorganization application by HMV’s parent company HUK 10 Limited London, which is part of Hilco Global. Senior Justice Geoffrey B. Morawetz appointed Gordon Brothers Canada ULC and Merchant Retail Solutions ULC as lead agents to sell any remaining HMV merchandise and financial consulting firm Richter LLP to be the receiver.

HMV, headquartered in Etobicoke (part of Toronto), opened its first store in Canada in 1986, and grew to 102 stores from Newfoundland to British Columbia, including flagship locations in Vancouver, Edmonton, Toronto and Montreal. It was named Canadian Music Retailer of the Year 23 times by the Canadian Music and Broadcast Industry Awards. 

The company opened two stores last year and cut a deal with Ticketmaster to have outlets in about 40 of its locations.

According to the press release announcing the closure, "The market for CDs & DVDs in Canada has experienced more significant declines in each of the last two years than has been seen in most other major markets. HMV Canada, however, with over 220 million in sales, had outperformed the market particularly in the sale of back catalog titles, which were the clear strength of its retail offering. HMV Canada has also been central to the growth of Blu-Ray movies and vinyl records in the market."

In an exclusive interview with Billboard, HMV Canada's CEO Nick Williams, who started with HMV Group U.K. in 2002, talks about the efforts made with the industry to save the chain and its closure.

Billboard: What happened at Friday's hearing?
Nick Williams: We got approvals to protect the business and put it into administration. The bottom line is that in recent years declines have become more acute. Of course we worked very closely with our core suppliers, the labels and the studios, as we have done throughout our whole journey to maintain a retail model for them to get to market CDs and DVDs. The last two years have become difficult really for two reasons: one, of course, both the labels and the studios have other avenues to market; and subscription services and streaming services have become more dominant and subsequently have had an impact on the decline of our sales. We've obviously been engineering our model, so to speak, so that we can find other ways to bring revenues to the business.

Last year you even opened a couple of stores.
We did. The retail model is ever-changing. Lots of stores throughout the whole journey have closed or opened or moved or relocated, that's quite common.

In the documents, it states Hilco hadn't received any payments since 2014. but the headline on a January 2015 Financial Post piece read "How the digital revolution actually helped save HMV" and you are quoted as saying "Our retail business is stable and growing."
What happened was, generally anyway, was that when people buy music or film it is helpful to everybody because it keeps people engaged, right? If you think about more than ten years ago when iTunes was launched, it re-engaged people in purchasing and owning music.

At that time you felt the restructuring had helped?
Absolutely.  While we have seen most of our competitors on the retail side of the business close, [we hadn't] and I think that's down to the fact that we have a much better offer and much better people and service-offering in our stores.

You came in as head of HMV Canada just before Hilco acquired it and were working with [Hilco Capital investment director] Chris Emmott on restructuring. Wasn't one of the strategies to stock the shelves with ancillary products?
In 2011 when Hilco acquired the business, we were loss-making for the first time and needed to renegotiate all our terms with key suppliers and reset the model. We sat down with our partners, the labels and the studios, and together figured out a way to make the model profitable. We've actually bought almost a billion dollars [CAD, about $762 million] worth of product from both the studios and labels combined, so they benefited hugely from us continuing after 2011 when the model was broken.

The reality is that a younger audience is less into purchasing music and film than the generation ahead of them. So we had to find a way to get the youngsters back in. Bringing in pop culture items and fashion and things that are relative to popular culture certainly did that job for us. We started to see a more younger audience come back into the stores. More recently vinyl has had a revival and we've seen big increases in vinyl.  We started stocking it a few years ago, but we really expanded the offer in the last 18 months so that there is a significant range in every store.

So you went to the studios and the majors and asked them to take a haircut and the rest in installments?
Well, I wouldn’t use that expression, but yes, to help us to club together and think about how we could support the model and extend the life of [of HMV] further. 

Did the big studios and labels say no?
No, most of them said yes actually.  We just couldn’t get everybody to commit to the model. The problem is that you need everybody to commit because we can’t buy our content from anywhere else; it has to come from those majors so we are totally reliant on them providing us with their owned titles. So the offer was not as strong as it had to be for our consumers without some of those studios in it.

You’ve been with HMV since 2002 so you knew you had your work cut out for you when you came to Canada to take this on, right?
I was with HMV Group in the UK in 2002 and joined the Canadian business in late 2009. We knew it would be a challenge, but it wasn’t a challenge we ever thought was insurmountable. You can imagine that when you’re trying to readjust a model that is already broken in 2010, 2011, you’re never sure how long you’re going to be able to do that; but the fact that we’ve done it for so long is quite amazing. I think everybody feels very proud of that. Arguably people had written off the brand many times over and we’ve felt that we’ve always been able to bounce back and provide something that is still relevant to the market and, unfortunately, now we’re at a point where we were just not able to convince all of our suppliers and partners to do that.

You had a bank facility from Bank of Montreal for $30 Million?
Yes we’ve had a bank facility with Bank of Montreal for a number of years and until very recently. They’ve now relinquished that line.

You had some layoffs at head office on Friday?
Yes, unfortunately, we had to downsize the office.  Once you’re in administration, the first decision is who you actually need to help do the wind down. So we have approximately nine weeks now for store liquidation. So you only need a certain number of team members to do that.

How many were let go?
Approximately 60 people on Friday

So not just upper management?
No, right way through. 

Do employees get some kind of severance package?
The employees will be continued to be paid during the liquidation process in their respective location.  All other employees are being supported through the receivership process.

The rest are there until April 30?
Each store will trade through the end of its liquidation, but that’s to be determined. I won’t be aware until [this] week what that program will look like. That’s being conducted by the administrator Richter and Gordon Brothers, who are the lead agency in the liquidation. They’ll determine how long it takes, depending on the speed at which the sales goes through and the stock depletes.

That’s the thing that’s so sad about all this is unfortunately for our employees who have worked so hard and, obviously for our loyal customers who have spent so much time with us, we’re very sad that it had to end. We’re grateful and thankful for the number of years they’ve given us.

On social media, there are many positive posts from people who bought their first albums there or got their first job in the music industry at HMV and are now in executive positions. There’s lots of reminiscing.
I know. It is quite amazing how many people have come out and been quite vocal about their memories of either working or spending time there or being a partner with us. Friday was a very sad day for me.