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Overview

ERA produces the following reports and information for its members, all of which can be accessed through our website.

  • Yearbook
  • Weekly dashboards
  • Research reports
  • Information and fact sheets

Should you wish to purchase the yearbook or obtain any of the fact sheets listed please contact the ERA office - admin@eraltd.org

Our yearbook is available at a cost of £50

Yearbook Introduction

UK Market Statistics

Entertainment's Best Result Since 2009

By Steve Redmond and Luke Butler

Every year since 2008, ERA's annual Entertainment Monitor has reported bad news, the market declining year-on-year-on-year to the extent that 2012 was more than 10% off the 2008 peak.

In 2013 the pattern was finally broken and the entertainment market returned to growth, recording a 4% gain to reach £5,295.6m, its best result since 2009. Both videogames (up 6.6%) and video (up 3.7%) grew stronglyand even music declined by just 0.5%, its best result in a decade. Had its release schedule been better, music too would have achieved an increase.

Given the 10 years of uncertainty which preceded it, no one should underestimate the importance of this achievement by retailers and digital services. After a decade of investment and the expenditure of hundreds of millions of pounds, it seems that they have stabilized the cannibalizing effect of digital technology and in many instances turned it to their advantage.

They have developed new business models based on rental, streaming and downloads while also supporting new hybrid technologies (most notably Ultraviolet in video) which aim to bridge the gap between their existing physical businesses and the digital future.

What has emerged is an entertainment business which is broadly two-fifths videogames, two-fifths video and one fifth music, reflecting the fact that at the moment video and games more effectively utilize the high quality displays, accelerometers and touchscreen capabilities of the most common devices than does music.

2013 Yearbook 1

Physical formats continue to be in retreat despite the continuing and paradoxical increase in the number of physical retail outlets selling entertainment (see page 16). In 2013 it was music which suffered the sharpest physical decline (down 7.7%) while games - cushioned a little by the launch of the new Xbox One and PS4 platforms (see p 24) had a relatively modest 2.9% fall.

In digital, video was the top performer with sales up over 40% as the sector benefited from the rapid growth of subscription models from the likes of Lovefilm and Netflix. Videogames - entertainment's most digital market - grew digital sales by another 16.4%, while music's digital revenues failed to replicate the kind of surging growth seen in recent years to register an increase of just 8.6%.

The result of all this is an entertainment market which is now 43.4% digital and 56.6% physical. More than half of videogames revenues are now digital, while video remains the least digital, with physical still accounting for nearly 70% of revenues.

2013 Yearbook 2

Digital files and streams are of course only one element of the internet-powered entertainment market. Home delivery retailers such as Amazon have taken an increasing share of the physical market to the extent that they now account for one in five album sales, (see p16). We have known it was coming for years, but in 2013 it finally happened: the combination of digital and home delivery sales means entertainment is now primarily a market conducted online.

Driven in particular by the rapid growth of mobile and streaming, in 2013 60% of total sales of games, video and music were generated either digitally or via the internet store-fronts of home delivery retailers.

2013 Yearbook 3

Notes: Games microtransactions are counted within access spend. All online console transactions are counted within ownership spend including full game downloads and paid downloadable content.

It is telling that while ownership models feature among the fastest-growing sectors in the entertainment business, all of the fastest-falling sectors are ownership models.

The implications for the entertainment sector if this trend continues are significant. On a banal level it suggests that the market in the future for all kinds of storage from flash drives and hard disks through to CD and DVD racking is likely to be limited.

More fundamentally it suggests the need for a fundamental review of resource allocation and business metrics in a digital world - with clear implications for the deals retailers strike with suppliers. In service-based access models customer relationship management, thinking through an ongoing relationship with known customers rather than dealing with a series of discrete transactions, is a core competency. Meanwhile average revenue per user may be a far more relevant measure in an access-based world than unit pricing. The optimum pricing level to maximize revenues may be very different from what it is now.

This is already a live issue in the music streaming market where there is a growing consensus among services that the current standard £9.99 per month for a premium mobile subscription is simply too high to address a mass market.

Whatever the results of that particular discussion it is clear that the switch to a diverse entertainment ecosystem embracing both access and ownership models will continue to pose fresh challenges for both retailers and suppliers alike.


2013 Yearbook 4

 

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