More physical stores sell music and video than ever before

24 February 2015 - Press release

More physical stores sell music and video than ever before

Entertainment retailers smash 10,000 outlet barrier

UK digital entertainment services now exceed 120

 

The number of physical stores selling music, video and videogames reached an all-time record in 2014, according to new figures published in the Entertainment Retailers Association (ERA) Yearbook today (Tuesday, February 24).

Despite a challenging physical market for CD, DVD and Blu-ray, the number of physical outlets selling video grew by 18.8% over the previous year to reach 10,500 while the number of outlets selling music increased by 20.4% to 10,391. The number of games outlets grew by 1.3% to 5,665.

The growth in the number of physical outlets comes despite the rapid growth of digital services. Industry estimates suggest there are now 123 digital entertainment services operating in the UK (76 music, 25 video and 22 games).

ERA CEO Kim Bayley said, “This is an extraordinary result which means that UK consumers have a greater choice of outlets from which to buy music, video and games than ever before. From specialist chains and independents, through to supermarkets and fashion stores, to internet retailers, download and streaming services we can all now access music, video and games wherever or whenever we want.”

Key reason for the growth in the number of physical outlets selling entertainment is an increase in the number of supermarket convenience stores and generalist retailers like Wilko, BHS and Matalan selling limited ranges of music and video aimed at the impulse market.

Said Bayley, “Physical outlets seem to have the edge when it comes to impulse and gift purchases. You cannot giftwrap a download or stream.”

 

	Number of UK entertainment outlets
	2010	2011	2012	2013	2014	Change
Video	7,642	7,749	8,059	8,840	10,500	+18.8%
Music	6,808	7,453	7,728	8,633	10,391	+20.4%
Games	6,760	6,644	6,180	5,590	5,665	+1.3%
	Source: ERA Yearbook

 

Internet and digital sales now dominate

The increase in the number of physical entertainment outlets comes despite the continued momentum of internet retailers (such as Amazon) and digital services (Netflix, iTunes, Spotify etc).

In 2014 sales through bricks and mortar outlets accounted for just 33.9% of the £5,664.7m entertainment market with internet-based transactions (comprising internet-ordered physical product as well as downloads and digital services) accounting for 66.1%.

The videogames market is now 61.3% digital and with digital’s share of the combined video, games and music markets 49.9% digital in 2014, 2015 looks likely to be the year entertainment becomes a majority digital market.

 

Physical versus digital share of entertainment sales 2014
	Physical	Digital
Videogames	38.7%	61.3%
Music	50.2%	49.8%
Video	63.0%	37.0%
Total	50.1%	49.9%
Source: ERA Yearbook

 

Console games, video and music streaming and vinyl albums are fastest-growing formats

While the combined video, games and music business grew by a modest 2.3% in value in 2014, some product areas showed dramatic growth.

Most notable was soaring growth in the games market, with digital games up another 18.8% to £1.5bn and the impact of the first full year’s worth of sales from the next generation games consoles, the Sony PS4 and Microsoft’s Xbox One, which together generated sales of over £500m.

But there were also strong performances from digital video (Netflix, Amazon Prime Instant Video, Sky, iTunes), music streaming (Spotify, Deezer) and vinyl albums.

 

Entertainment's fastest growing formats - ranked by size
	2013 market value	2014 market value	Growth
Digital games	£1,266.0m	£1,504.0m	+18.8%
Digital video	£624.8m	£807.9m	+29.3%
Playstation 4 software	£65.0m	£276.0m	+324.6%
Xbox One software	£53.0m	£229.0m	+332.1%
Music streaming	£106.0m	£175.0m	+65.1%
Vinyl albums	£14.7m	£25.9m	+76.2%
Source: ERA Yearbook

 

Entertainment’s next great revolution – access services

Entertainment retailing has traditionally been based on selling ownership in a disc (or a tape), but in 2014 for the first time one third of revenues came from subscription and on-demand services which are based on selling access rather than ownership.

Games is the biggest access category, driven by mobile ‘free-to-play’ in-app purchasing, micro-transactions and online subscriptions to multiplayer online games. Nearly £1bn was spent on accessing games in 2014, representing 40% of the games market. 

The rapid rise of digital video subscription services like Amazon Prime Instant and Netflix, combined with significant growth in on-demand film and TV transactions via satellite and cable TV operations like Sky Store and BT TV, increased video access revenues by 17.3% to £754m. 

However, it was ‘all-you-can-eat’ music subscription streaming services where consumer-spend on access services grew fastest of all in 2014. The £175m spent in the UK on accessing music via services like Spotify and Deezer was up over 65% year-on-year. 

 

Ownership versus access - share of entertainment sales 2014
	Ownership share of revenue	Access share of revenue
Games	59.5%	40.5%
Video	65.4%	34.6%
Music	83.0%	17.0%
Total	66.1%	33.9%
Source: ERA Yearbook

 

ERA CEO Kim Bayley said, “Ever since the birth of UK entertainment retailing in 1921 with the opening of the first HMV in London’s Oxford Street, entertainment retailers have proven themselves to be innovators. Thanks to the ground-breaking technology and heavy investment of a new breed of entertainment retailers offering access services, we are witnessing a revolution in the entertainment industry, benefitting consumers, creators and content owners alike.”