At last, good news for the entertainment retail industry

In a recent blog, we looked at the threat Brexit represents to the future of the UK creative industries, focusing mainly on the games industry – and for a very good reason: the UK games retail market is now a £3.35bn industry, its sales now almost equal to that of home sales for music and video combined.

Music, video and games sales are rising

But this blog perhaps missed the wider, refreshingly positive story about the state of the entertainment market as a whole.  For many years, reports have suggested

the retail film and music industries are in trouble, that streaming sites such as Spotify, Apple Music and Netflix have had a catastrophic impact on revenues and sustainability.  Yet, whilst physical sales of music and video decreased by 4.2% and 17% respectively between 2016 and 2017, digital music sales increased by 19.4%, and video by 22.4%.  This has led to an overall increase in sales across the two categories of 7.5%, taking revenues to £3.9bn – quite a different tale to that which we are often led to believe.

If current trends are anything to go by, digital is making media more accessible, and aiding industry growth.  How many of us have downloaded albums from our preferred streaming service, which we would never have risked purchasing outright? All those downloads and streams add up.

  2016 2017 % change
Music Physical £475.4 £459.4 -3.4%
Downloads £214.6 £165.0 -23.1%
Streaming £406.6 £577.1 41.9%
Total Music £1,096.6 £1,201.5 9.6%
Video Physical Retail £893.6 £742.1 -17.0%
Physical Rental £48.4 £40.5 -16.3%
Digital £1,559.4 £1,906.0 22.2%
Total Video £2,501.4 £2,688.6 7.5%
Games Physical £776.0 £792.4 2.1%
Digital £2,284.2 £2,560.2 12.1%
Total Games £3,060.2 £3,352.6 9.6%
Total Entertainment Physical £2,193.4 £2,034.4 -7.2%
Digital (inc streaming) £4,464.8 £5,208.3 16.7%
  Total Entertainment £6,658.2 £7,242.7 8.8%

Whilst streaming has become the norm for music and video, streaming games services – particularly in the console market – are only in their infancy.  Concerns have been raised since Microsoft’s recent announcement that it would be releasing first-party titles on its Games on Demand streaming service, on the same day they release view the traditional channels to buy outright. Curzon Cinema are offering a similar release-day service with their Curzon Home Cinema service, albeit with perhaps less commercial content.

There should be a note of caution for the games market here. As an analogy, and while the last couple of years have seen positive music industry sales, this only begins to reverse a negative trend which began in 2004. In that period the total value of the recorded music sector fell from £1.2bn to around £688m in 2015. While there were many contributory factors, the launch of Napster and other peer-to-peer downloading services in 2003 did not help. Even the slow conversion to approved streaming services has taken a long time to show returns. If games companies want the wider access that streaming offers, they must be careful not to kill the golden goose.

One thing is for sure, though; the move to digital is making media far easier to consume, and, correctly exploited, this is fueling industry growth.  The home entertainment market’s growth is “outpacing growth in the wider economy by a factor of more than four” to a total value in 2017 of £7.24bn, 8.8% higher than 2016, according to the Entertainment Retailers Association (results below).  Right now, the industry’s future is looking encouraging and that is something we should all celebrate.

James Dodd

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Martin Tripp Associates is a London-based executive search consultancy. While we are best-known for our work in the TMT (technology, media, and telecoms) space, we have also worked with some of the world’s biggest brands on challenging senior positions. Feel free to contact us to discuss any of the issues raised in this blog.