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UK Market Statistics
By Luke Butler - ERA Research
2015 was a year when all 3 of
the sectors ERA represents returned to growth on the back of
stellar digital gains.
Total UK entertainment retail consumer spend grew for the third
consecutive year in 2015, up 5.6% to £6,123m.
After posting marginal declines last year, music and video
revenues made a welcome return to growth, up 3.5% and 1.5%
respectively, while the games category continued to power ahead, up
10% versus 2014.
In response to a consumer that now expects delivery of
entertainment across a myriad of formats, platforms and devices,
retailers have had to invest, adapt and innovate to meet that
demand. In 2015, well over half of all revenues across music, video
and games were generated by retailers and services that didn't
exist 10 years ago.
After several years of market transformation, that investment
and innovation has paid off, creating a diverse, multichannel
entertainment retail landscape that, in 2015, delivered healthy
revenue growth across each of the major home entertainment
In terms of category share, further prodigious growth in the
games sector last year saw spend rise to £2.8bn, securing over 46%
of the entertainment retail market, while the £2.2bn spent on video
content represented just under 37%. Marginally more than £1bn was
spent on music in 2015 with its share falling to 17% from 18% in
DIGITAL AND PHYSICAL FORMAT SPLITS
After years of surging internet-based consumer spend on
downloads and streaming, 2015 was the year that entertainment
retail finally became a majority-digital business. Over £3.5bn was
spent on digital formats across music, video and games,
representing 57.6% of the total market, up 19.2% versus 2014.
Spend on digital video in particular took off in 2015. While the
category still derives most of its revenues from physical formats
(51.5%), digital spend was up fully 30.3% year-on-year, driven
largely by the millions of new accounts that were opened with
online subscription services in the UK, provided by companies like
Netflix, Amazon Prime Instant and NowTV.
Games, however, remains the most digital category of all.
In terms of total revenue, two out of every three pounds
generated by games in the UK last year came via content that was
digitally delivered directly to consoles, PCs, mobiles and tablets,
or accessed online. Spend hit a record £1.9bn, up 17.1% versus
Music - the first of the entertainment categories to derive any
meaningful revenues from digital formats when iTunes was launched
in 2004 - became a majority-digital business for the first time in
2015, with the £544m spent on downloads and streaming subscriptions
representing 51.4% of the total music market.
Overall spend on physical entertainment formats declined by 8.5%
in 2015, resulting primarily from very soft physical video sales.
Spend on DVD and Blu-ray slipped 16% year-on-year, with £220m less
taken through the tills versus 2014.
Sales of packaged games software contracted marginally in 2015,
down 2.2% to £928m, while the long-term decline of spend on
physical music formats slowed dramatically last year, down just
0.5% versus 2014.
BRICKS AND MORTAR VERSUS ONLINE
When you combine accelerating digital sales with sales of
physical formats online via home delivery retailers like Amazon,
the migration of the entertainment consumer to the Internet is even
more sharply defined. Combined digital and physical home delivery
spend in 2015 amounted to just under £4.4bn, meaning that 72% of
all entertainment retail transactions were conducted online last
While Amazon is clearly the most successful and well-established
retailer in the home delivery space, the whole market is in fact
comprised of a large number of smaller, more focused online
operations. As well as being home to the physical online arms of
well-known high street brands like hmv and Game, and grocers like
Tesco and Sainsbury's, many specialist, independent
bricks-and-mortar retailers, like Townsend Records and Presto
Classical for example, successfully exploit the sheer scale of the
channel to reach customers well beyond their physical shop
While all three entertainment categories now conduct the
majority of their business online, the growing popularity of mobile
and direct-to-console purchases in the games market means that well
over three-quarters of total games transactions are now executed on
The video category, while still majority-physical in terms of
format share, generates over two-thirds of actual spend via the
Internet and music, with over £720m spent online last year, derived
68% of its revenues over internet based channels in 2015.
ACCESS VERSUS OWNERSHIP
Integral to the digital revolution in entertainment retail is a
UK consumer that's becoming increasingly comfortable with the
concept of paying to access entertainment, rather than paying to
own it outright. £2.4bn was spent on accessing music, video and
games content in 2015, up 23% versus 2014, with the vast majority
of transactions occurring online. Revenues are booming across a
number of digital subscription and on-demand services with all
three entertainment categories experiencing significant growth
across their respective access models. 39% of total spend on
entertainment last year was derived via models that provide the
consumer with access to entertainment rather than ownership.
That growth in demand is having a notably transformative effect
on the video market where consumers spent £972m accessing film and
TV content in 2015.
It is digital subscriptions to Video-on-Demand services in
particular that have really captured the consumer's attention and
boosted access revenues significantly. Services like Netflix and
Amazon Prime Instant - now offering nearly 3,000 titles to rent for
around £6 per month - have gone from generating just £100k in spend
in 2008 - when the physical disc was still, by far the preferred
format to access video on - to nearly half a billion pounds in
Combined with the steady growth in on-demand film and TV
transactions across the satellite and cable sector, 43% of total
video category spend is now accounted for by access models
Despite the combined effects of growth in spend to access with
double-digit declines in DVD and Blu-ray sales, video remained a
majority 'ownership' category in 2015. 57% of total spend came via
physical disc purchases, or from sales of download-to-own formats
via retailers like iTunes and Amazon. Sky's innovative 'Buy and
Keep' hybrid offer - where you buy a permanent video download and
get sent a physical copy in the post - is also contributing
significantly to the growth of the digital retail channel.
The story is largely a similar one in music. While the £251m
spent on subscriptions to all-you-can-eat music streaming services
like Spotify and Apple Music in 2015 is clearly having a negative
effect on digital download sales, steadying CD revenues and the
explosive growth in vinyl means that three-quarters of total spend
in the category is still accounted for by transactions to own.
In the games category, revenues derived from mobile in-app
content and online subscriptions have slowed slightly year-on-year
but access spend still topped the £1bn mark in 2015, representing
41% of the category total.