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Yearbook Introduction

Booming digital revenues outstripped the decline in entertainment's most problematic physical formats in 2010, blunting the effects of what could have been a disastrous year and resulting in a decline in overall market value of 4%.

ERA estimates that the total value of the entertainment retailing market in 2010 was £5.3bn, including for the first time digital revenues for video and videogames, courtesy of IHS Screen Digest.

Volume figures - for which no equivalent digital data is available - were down across the three markets of video, games and music by just over 40m units or 8.7% to 427.3m units.

This means the UK's 26m households each bought an average of 16 albums, videos or videogames in 2010 compared with 18 in 2009.

Inevitably the verdict on 2010 varies dramatically according to the product mix of the particular retailer concerned.

Those able to take full advantage of entertainment's three most buoyant markets - Xbox 360 and PS3 videogames, digital and Bluray would have seen a 22% increase in business.

Those on the other hand fully exposed to entertainment's three worst performing formats - software for the Nintendo platforms, physical albums and DVDs - would have suffered a decline in sales of 13.6%.

In 2010 as never before the outlook for entertainment retailers was dependent on the degree to which they were able to adjust their product mix to make the most of the new and avoid more established formats.

Inevitably many established physical retailers feel locked out of the digital market, hence the increased activity in those physical formats which can still demonstrate growth.

In terms of share of sales, despite a torrid year for DVD - particularly catalogue DVD - video increased its share of the overall entertainment market to 41% by value. Videogames held steady at around 36%. But music fell to a new low of 22.5%

 

Digital formats

ERA's market figures this year include data from IHS Screen Digest on the value of digital revenues in the video and videogame sectors. What is striking is that quietly, far below the radar which has focused on music's digital future, both video and videogames have built substantial digital revenues.

Not only do videogames's digital revenues of £411m last year far outstrip those of video and music put together, the aggregated digital share of the entertainment retail market is now in excess of 14%. And inevitably it is set to grow.

Physical formats

More problematic is what to do with some of entertainment's ailing physical formats. The physical album market and the DVD market together shrank by almost £300m in 2010 alone, split almost 50/50.

A key factor will be the quality of content from suppliers. In the case of albums, 2010 is generally acknowledged as having been a poor year for new talent. A sudden upturn in new mainstream music - and at the time of writing Adele is offering just that - might just be enough to slow the decline. In DVD, with sales of catalogue titles suffering extreme pressure, retailers are essentially reliant on Hollywood generating a strong of record-breaking blockbusters to drive volume.

There's more optimism in the games market where the launch of the new Nintendo 3DS portable console is the boost the Nintendo marque - the main contributor to falling sales in 2010 - really needs.

Defining the market

The structural changes in the entertainment business wrought by technology pose issues not just for retail buyers, but for market analysts too.

Teasing out the trends in entertainment becomes ever more difficult as the very definition of what it means to be an entertainment retailer also changes.

For the purposes of this year's figures we have included only those download revenues which are most akin to physical retailing, ie download-to-own models.