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Kim Bayley on the BVA's Video Insight Seminar

Friday July 17, 2015

Trust a retailer to tell it how it is. That was one clear takeaway from yesterday's Video Insight Day held by the BVA and supported by ERA.  Amid the glitzy presentation, lavish eats and hardcore security (attendees had to check in their phones and sign an NDA!) the presentation from Tesco Non-Food Category Director Ian Ditcham tackled one of the biggest challenges in the video industry with laser-precision: the negative effects of early digital release windows.

The ERA Manifesto, published in February, identified the issue.

"The video industry seems wedded to inconsistent windowing strategies," we said, "with titles available on download-to-own platforms far earlier than on physical formats.

"Studios need to adopt windowing strategies that work for the customer and recognise that a customer should not be forced to choose between physical and digital."

Ian Ditcham amplified the point at yesterday's event effectively telling video distributors: releasing digital before physical reduces the effects of in-store efforts and theatre.  In essence there's no point putting in enormous effort to promote something which has already lost its sparkle.

Instead, he said, the video industry should look to the example of the hugely successful games industry which has proven it can sell digital around physical, growing the overall market, rather than selling digital at the expense of physical.

The answer he said is more cross category promotion and cross physical/digital promotion.

To be fair many studios have acknowledged the point. In ERA's rounds of meetings with the video industry to discuss our Manifesto, many of them have acknowledged the need to do more to support Blu-ray and DVD.

The point now is surely to back up those kind words with action. As presentation after presentation pointed out, consumer appetite for physical formats is still robust. It is way too premature to push customers towards digital by using artificial windowing strategies.

Posted by Kim Bayley at 09:42

Kim Bayley on why ERA is backing Monday as the optimum day for music releases

Thursday November 27, 2014

Gut reaction and an unswerving conviction that you are right may be an admirable trait in an A&R man, but it fails to cut the mustard in the more pragmatic commercial business of music retailing.

That's the key to ERA's objections to the major record company-sponsored plan to enforce a worldwide Friday release date from next Summer.

Our view is that the numbers simply don't add up.


When news first leaked of the plan to adopt a Global Release Day a couple of months ago, retailers and digital services were intrigued.

With national release days currently spread through the week, it is certainly the case that this encourages short-term piracy. Pirate networks on theworldwideweb are by definition global so standardising on a single day seemed like a smart opportunistic move which could potentially help sales.

Full marks, major record companies.

But our enthusiasm soon waned when we heard that the chosen day was Friday. The objections focused on the impact on sales and the impact on costs.

On sales, the UK's current release day, Monday, provides a real boost at an otherwise quiet time of the week. In fact Monday is currently second only to Saturday for sales. Inevitably it generates not just sales of new releases, but impulse buys too. Moving to Friday would not only kill this Monday sales boost, it would likely lose those add-on sales, raising questions over whether many stores would bother opening on Mondays at all.

On costs, the picture was even bleaker. An early week release date gives time for restocking ahead of the weekend rush. Move to a Friday and retailers could be faced with an unappealing choice between being out of stock or paying expensive surcharges for weekend delivery.

On the basis that we anticipated that retailers arguing for the status quo would simply be dismissed as traditionalists, we decided to commission research to determine precisely what the costs - and any potential sales uplift - resulting from a switch to Friday might be. We polled our members both physical and digital. We modelled sales effects over every retailer type. We even commissioned consumer research to check the preference of music fans and of those who expressed a preference, most opted for Monday. (To be fair, a BPI survey showed music fans backing Friday, but in both cases the vast majority of consumers had no preference at all)

On costs, our research was clear: taking additional staff and delivery costs into account, a switch to Friday would need to generate a minimum of £8m in additional retail sales a year just for retailers to break even ie in a market which is clearly falling we would need an increase of £8m just to stand still (and that's without the additional costs to the record companies themselves which would inevitably be passed on to retail).

On sales the evidence is inevitably more speculative. IFPI commissioned research suggested a move to Friday would result in an overall increase in UK recorded music sales of around 4%. Sounds good, but that is equivalent to week one sales of every new release over the course of the year increasing by a third. It would be lovely if it were true, but it does not seem likely.

Intriguingly the IFPI numbers suggested that 95% of the benefit of switching to a Global Release Day would still be achieved on a Monday compared with a Friday.

For us it's a no brainer: if we can capture 95% of the benefit with none of the costs, why would anyone even consider a Friday? Adding risk and cost for a minimal benefit just doesn't make sense.

And that's why we have taken the position we have. It's not based on "gut feel" or "conviction" - just plain hard fact.

If there is to be a Global Release Day, an early week release really does make more sense. The fact that US retailers are prepared to abandon their time-honored Tuesday release date for Monday only serves to reinforce the point.

Retailers have no problem conceding that on matters creative, on matters A&R, record companies are far more qualified to make the call. But when it comes to what's best for retail, what's best for the consumer and what's best ultimately for sales, we really do know our stuff.

Posted by Kim Bayley at 14:37

Steve Redmond on the real story behind that controversial speech on copyright

Monday June 30, 2014

It would be true to say that ERA DG Kim Bayley's speech on copyright and licensing last week was not received with unalloyed joy by the music industry Establishment. Some of the language used to describe it was rather ripe to say the least. 

Kim Bayley

Kim Bayley: Controversial Speech

But reading the text - you can see it here - it's hard to see what the fuss is about. Its core premises seem self-evident. Although, credit where credit's due, things are considerably better than they were - streaming being a prime and positive example - the music industry clearly was and arguably still is slow in coming to terms with new technology. Licensing for digital services in Europe clearly is overly-complex compared with physical retailing. And there have to be opportunities to improve copyright law.

In fact Bayley's central argument that copyright law designed for a pre-digital age of sheet music and plastic discs needs to be updated is repeated almost word-for-word in a recent submission by the RIAA to the US Copyright Office.

To be clear, not everyone has been critical of Bayley's intervention. A stream of emails and calls to the ERA office, not just from members, but from artist and manager organisations have been overwhelming positive.

The explanation for the violent reaction from content owners is at least in part attributable to shock at the idea that retailers should have anything to say about copyright at all. For decades this has been a debate record companies and music publishers and collection societies have pretty much had to themselves. In that sense last week's kerfuffle is akin to that when the Music Managers Forum first came into being. Historically retailers have never taken an independent line on copyright, but there's a simple reason for that: in the physical world there was no need, not least because the relevant copyright law was designed for a physical age and worked pretty well.

Digital services in contrast only exist at all through licensing relationships based on copyright law. And many services feel the status quo is not working. Over the past months as the European Commission has conducted its consultation into copyright, they have watched bemused - and with increasing frustration - as one content owner organisation after another has lined up to declare that the current copyright regime is pretty much beyond improvement.

It was that frustration which formed the background to Bayley's intervention.

My sense is that digital services do not want a revolution, but they do feel the content industry has to wake up to some very real problems.

The important thing now is to get beyond the name-calling and frustration and see if the two sides can find common cause.

Posted at 13:34

Even supermarkets couldn’t get Beck to Number One

Monday March 31, 2014

You have to grow a thick skin if you work for one of Britain's supermarkets.  After all, they are regularly pilloried for everything from encouraging food waste (through BOGOFs) and alcoholism (drinks promotions) to killing High Street stores to selling horsemeat as beef. But even hardened supermarket executives were a little surprised to discover their latest "crime" the other week - preventing critics' darling Beck from reaching Number One in the Official Albums Chart with his latest album,Morning Phase.


A lengthy editorial in Music Week lamented the fate of "poor Beck" because the "likes of Tesco, Sainsbury's and Asda decided against giving their customers the chance to buy it". The clear implication was that these supermarkets had arbitrarily deprived "poor Beck" of the Number One he deserved.

Beck's album sold 13,819 copies in its first week to reach number four, 2,730 copies behind the Number One, Bastille's Bad Blood. Is it conceivable that the supermarket buyers got it wrong and that with their support, he would have sold an additional 2,730 copies and reached Number One?  

Unfortunately not.

To suggest otherwise, say the supermarkets, is to fundamentally misunderstand who they are and their contribution to the music market.

Beck's sales were disproportionately dominated by pre-sale and core fanbase Monday purchases which we can assume the supermarkets would never have been able to capture. Sunday and Monday sales accounted for 43% of sales. Likewise sales were disproportionately digital with a 43% share of sales going to non-physical formats. That meant the addressable physical market was necessarily smaller. With an additional 2,730 sales required to deliver him the Number One slot, it would have meant every single full-range supermarket (ie non convenience format) in the country would have had to sell at least one and maybe two copies  of the Beck album that week. As one buyer put it, "Our customers are most likely to be females aged between 25 and 45 who only buy four or five CDs a year. Beck is unlikely to be one of them."

The Music Week piece mused wistfully that "Unlike with the likes of HMV and the independents whose fates are tied to those of the record labels supplying them, supermarkets can pick and choose what kind of products they support." The point is correct, even if the sentiment is misguided. Supermarkets argue that it is their skill in selecting precisely which products are appropriate for their customers which enables them to deliver huge numbers on the right kind of product.

In the event, the performance Beck's Morning Phase has vindicated the supermarket view that it was never likely to be anything other than a specialist sell. Week two sales more than halved to 5,512. Week three sales halved again to 2,906.

Between them the nation's supermarkets sold £188m worth of albums in 2013, a quarter of the market. Recognise us for what we do well, say the supermarkets, rather than criticise us for not stocking albums our customers simply do not want.

Posted at 09:11

Chancellor Osborne and the exaggerated death of the 99p download

Tuesday March 25, 2014

The Treasury spin machine traditionally works at full tilt at Budget time and this year was no different, but this week's breathless reports about the death of the 99p download took the biscuit.

In a range of media from The Guardian to Wired to Forbes came the news that "in a little noticed announcement" in the Budget Chancellor Osborne planned to "clamp down" on a "tax loophole" affecting music downloads, apps and ebooks.


As a result, the days of the 99p download were numbered, the price of a single MP3 could go up to as much as £1.19 and the prudent Chancellor was set to net a huge windfall.

Unfortunately for the Chancellor, but fortunately for the rest of us, the stories bear little resemblance to reality.

First, the new measure has virtually nothing to do with the UK Chancellor. He is simply enacting the latest in a series of European Directives dating back to 2002 which seek to regulate the treatment for VAT purposes of digital goods and services.  The decision to levy VAT at the rate prevailing in the country of the customer's residence, rather than that of the retailer is not peculiar to the UK and will in fact apply across the European Union.

Second, the death of the actual 99p download seems unlikely. The most common location for music and video download stores operational in the UK - used by Amazon, among others - is Luxembourg where the current VAT rate of electronic downloads is 15% (apart from ebooks where the rate is 3%).

On a 99p download, that means that the retailer currently receives a fraction over 86p after VAT from which they have to pay for all costs including the music. If all costs stayed the same and 20% VAT were to be applied, that would increase the price of a download to just over £1.03, a long way away from £1.19.

Most industry watchers believe that the power of the 99p price point is such that as they have done in the past retailers and their suppliers will simply absorb the increase.

All in all, that Osborne clampdown and the supposed mortal threat to the 99p download look a little overblown.

Any impact of the European Directive looks set to be restricted to ebooks, which opens another can of worms entirely: why should ebooks be taxed at all when printed books remain VAT-free, a status of which the music and video industries can only dream?

But that's another story…

Posted at 15:39
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