HONG KONG — Debt-ridden HMV Digital China Group is voluntarily winding up its 25-year-old music and DVD chain HMV Retail, marking what could be the final chapter of a once-treasured Hong Kong retailer overwhelmed by the rise of online streaming media.

HMV Retail, the CD and DVD sales chain of HMV Digital China Group chaired by entertainment businessman Stephen Shiu Jnr, is being put into a process that leads to provisional liquidation to manage its assets, which means it could still find a buyer. The company said it is looking for investors to remain in operation.

The news followed the company failing to pay rent and other payments. It was facing a number of lawsuits by landlords and other creditors, the GEM-listed company said on Tuesday (Dec 18) morning in a stock exchange filing.

GEM is the second board of the stock market for smaller companies.

“The company is under negotiation with the landlords of the settlement plans,” chairman Mr Shiu said in the HMV 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,” Shiu said. “The Board believes that it is in the best interests of the Company and its shareholders as a whole to agree to the voluntary winding-up,” Mr Shiu said in the statement.

The British music retail chain entered the Hong Kong market 25 years ago and became the largest CD and DVD retailer in the city.

Mr Shiu blamed the rise of digital competitors, which have overwhelmed retailers selling CDs and DVDs with online streaming media, as well as the popularity of Apple’s Airpods, which sent sales of HMV’s bestselling earphones tumbling.

“Suffering from operational difficulties, HMV Retail was unable to escape from the crushing force of the wheel of history,” Mr Shiu said in the announcement.

Its main stores are in Central, Causeway Bay and Kowloon Bay. The stores in Central and Causeway had not opened as of 11.30am on Tuesday, a passer-by found, and the Kowloon Bay store didn’t answer the phone. It is unclear about their future.

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 the landlords of the shops of HMV in Central, Causeway Bay and Kowloon Bay filed separate lawsuits to claim unpaid rents amounting to more than a combined HK$5 million (S$877,000) and take back the shops.

Music lover George Lau represents the tide faced by HMV, which he used to visit often.

“Now I use streaming Spotify and Apple iTune to digitally download thousands of songs and create different playlists. 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,” Mr Lau said.

Ms Mydy Lai, a hairdresser in Central, recalled fondly browsing racks of CDs and DVDs at the HMV in Central.

“HMV is much bigger than other local CD or DVD shops, and it has more overseas music, movie and TV shows than other others. I used to shop there often,” Ms Lai said. “However, 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,” Ms Lai said.

Mr Louis Tse Ming-kwong, director of Hong Kong brokerage VC Wealth Management, said it would be difficult for HMV 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,” Mr Tse said.

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 possibly seek buyers.

The HMV Retail chain in Hong Kong has to date been established for 25 years, over this quarter of a century, the HMV Retail business in Hong Kong has faced numerous struggles and ups and downs,” Mr Shiu said in the stock filing. “But as time changes, the global development of information and economic climate have also changed, and although there were many reforms on the mode of sales for audiovisual products, they were no match against the digital tide.”

The group reported a net loss of HK$18.81 million (US$2.41 million) for the three months to the end of September, against a profit of HK$1.85 million a year earlier. Its retail business reported revenue of HK$31.55 million, down by 41 per cent from a year earlier, 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.

Mr Shiu’s company was originally called China 3D Digital, which produced films and offered artist management services. In 2016, Shui bought HMV’s retail music business for HK$408 million from AID Partners. At the time, Mr Shiu said he wanted to turn HMV into a lifestyle model, with restaurants for customers in addition to sales of earphones, speakers, and toys of characters from Star Wars, Batman and Superman and other movies.

“However, the HMV Retail business in Hong Kong experienced drastic changes during the past few months,” Mr Shiu said in the filing, adding that in addition to being hit by Apple’s AirPods, sales of speakers and other audio-visual products fell due to overall weak economic environment.

“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,” Mr Shiu said in the filing.

The film and artist management business will not be affected, Mr Shiu said in the statement.

HMV’s share price plummeted 14.29 per cent to 1.2 HK cents in early trading on Tuesday after the liquidation announcement. SOUTH CHINA MORNING POST