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UK Market Statistics
By Luke Butler - ERA Research
Innovation and diversity key
to growth as entertainment retail spend rises to
Total spend on music, video and games in the UK increased to
£5,664.7m in 2014, up 2.3% year-on-year. Following on from the 4%
rise posted in 2013, the entertainment market is once again
beginning to trend positively.
Contained within that overall market growth figure are some
contrasting category performances. Marginal declines in spend on
music and video - down 1.6% and 1.4% respectively - were offset by
growth in videogames sales, up 7.5% versus 2013.
Retailers continued to pour investment into an array of new
services in 2014, responding to an increasingly fragmented home
entertainment landscape and an evolving set of consumer
expectations. In videogames, at least, that investment is already
beginning to pay dividends, while upwardly trending digital
revenues in music and video suggest 2015 may see the return of
overall growth in those categories too.
In terms of total consumer-spend, the games category once again
took the lion's share securing 43% of the market, edging further
ahead of video on 39%. Music's share, meanwhile, dropped below 20%
for the first time, with sales of £1bn enough to secure just 18%
total entertainment retail spend.
DIGITAL AND PHYSICAL FORMAT SPLITS
2014 was the year when the UK entertainment retail industry
finally became a truly mixed economy. A booming appetite for
streamed music, on-demand video and mobile gaming, serviced by a
diverse and innovative mix of online retail models, significantly
boosted digital's share of the total entertainment market to very
nearly 50% in 2014.
£2,825m was spent on digital formats across music, video and
games, up 18% year-on-year and enough to offset the continuing
decline in spend on physical formats, which was down almost 10%
versus 2013 to £2,840m.
2014's digital surge was largely driven by the games and video
categories. 61% of total games sales are now delivered digitally,
with spend exceeding £1,500m, up nearly 19% year-on-year.
And, while video is still clearly a majority-physical business,
with 63% of its sales in 2014 coming via DVDs and Blu-rays,
significant spend increases on download-to-own formats and online
subscription services like Amazon Prime Instant and Netflix boosted
digital video revenues to over £800m, up 29% year-onyear.
Music - the most mature digital entertainment market - now
derives very nearly 50% of its total revenues via digital formats,
with 2014 spend on downloads and streaming subscriptions amounting
to £513m, up 1.9% versus 2013.
BRICKS AND MORTAR VERSUS ONLINE
It is not just the revolution in digital formats that has seen
the entertainment retail industry migrate increasingly online.
Unconstrained by the limited rack-space that a bricks and mortar
retailer must carefully manage, ecommerce giants like Amazon can
couple unrivalled depths of physical product range and availability
with the convenience of home delivery.
It is perhaps no surprise then that physical online retailers
have seen their combined share of physical format spend increase
every year since they launched on these shores in 1998.
In 2014, home delivery retailers secured approximately a third
of all physical sales by value across music, video and games. When
combined with the burgeoning growth in digital format revenues,
fully two-thirds (66.1%) of all entertainment retail transactions
were conducted online last year.
While all three entertainment categories are now executing the
majority of their business via the Internet, none has moved spend
more rapidly or more emphatically than games with 73.6% of the
category's total value transacted online in 2014.
Music's migration to the Internet is not far behind games with
66.9% of sales executed online, although video is taking a little
longer to shift given its revenues are still largely derived from
ACCESS VERSUS OWNERSHIP
In 2014 the UK consumer spent almost £2bn on accessing music,
video and games content across a range of subscription and
on-demand digital services. Up 21% on the year before and
accounting for 34% of total entertainment spend, this trend heralds
one of the most paradigmatic shifts in the structure of home
entertainment retailing since the launch of the MP3.
The concept of paying to access home entertainment is not a new
one of course. Think VHS and DVD video rental as a most obvious
example. But, with over 80% of UK households now equipped with a
broadband Internet connection of some description, paying to
instantly access an almost limitless inventory of songs, films and
games online is proving to be an increasingly compelling option for
many of us.
Driven by mobile 'free-to-play' in-app purchasing,
microtransactions and online subscriptions to Multiplayer Online
Games, access spend in the games category is the most prevalent of
all. Nearly £1bn was spent in 2014, representing 40% of total
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, has propelled video access
revenues up 17.3% versus last year to £754m.
However, shaped by tight windowing criteria that timerestricts
the availability of key new release titles, video retail still
remains a predominantly buy-to-own category. Purchased DVDs and
Blu-rays and a burgeoning digital sell-thru sector via services
like iTunes commanded 65% of total video spend in 2014.
It was on 'all-you-can-eat' music subscription streaming
services where consumer-spend on entertainment access models 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. Despite this growth, however, revenues in music
retail are still overwhelmingly derived on formats that you buy to
keep, representing 83% of total category spend.
It should be noted that most major music subscription services -
distinct from streaming operators in the other two categories -
have an ad-funded, free-to-play tier and derive at least some of
their revenues, not directly from the consumer, but from