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Cable Technology Feature Article

March 14, 2014

Indie Record Stores and Netflix Shine in UK Entertainment Distribution

By Tara Seals, TMCnet Contributor

When it comes to home entertainment distribution, it seems like all we hear is “video on demand” this and “Netflix” that. And indeed, online streaming services grew to represent more than a quarter of the consumer entertainment market in the U.K. last year, signifying a big consumption shift to new ways of accessing media.

That said, if you remember the days of browsing vinyl at the local platter shop with sepia-toned fondness, don’t despair: the numbers of outlets stocking music and video fare reached an all-time high, with independent retailers in particular thriving in the U.K.

According to new figures from the Entertainment Retailers Association (ERA), booming subscription sales by services like Netflix, Lovefilm, Spotify (News - Alert) and Deezer led the streaming market to claim 26 percent of overall entertainment revenue in 2013.

Subscription services weren’t the whole story. Electronic sell-through (EST) and physical sales—which collectively make up the “ownership model,” accounted for 74 percent of revenue.

Slicing the numbers in a slightly different way, overall Internet-derived sales - including home delivery, digital download and streaming and other access services - accounted for a clear majority of the £5.3 billion entertainment market in 2013, according to ERA figures, with a 60 percent share of sales, or £3.18 billion. That’s up 13.9 percent from 2012.

"This is stark evidence of the revolution in entertainment consumption being driven by entertainment retailers,” said ERA director general Kim Bayley. “The fact that 60 [pence] in the entertainment pound is now spent online and 26p in the pound is for access to content rather than ownership is a testament to the huge investment and technological ingenuity of retailers in providing consumers with new ways to enjoy the music, video and games they love."

The ERA pointed out that 2013 witnessed significant investment in new digital services. bloom.fm and Musicqubed launched mass-market music streaming services at sub-£5 price points; HMV, now under new management, refocused its entire store estate on its historic music and video heartland; Deezer introduced its new 'Hear This' feature, which is a personalized discovery tool combining expert recommendations and each individual's listening habits and preferences; Google (News - Alert) launched its All Access streaming music service to sit alongside its existing Play store; and Sky confirmed the convergence of broadcast and retail models with the launch of its Now TV streaming service sitting alongside Sky Store and Sky Go.

"The transformation of the entertainment market is often misrepresented either as some kind of force of nature beyond human control or as a far-sighted initiative of record and video and games companies. It is neither,” said Bayley. “The entertainment revolution has been driven by new and existing retailers taking huge gambles and investing in technology and new delivery mechanisms.”

All of this screams innovation, but don’t count out the traditional distribution outlets. The remaining 40 percent of revenue last year was generated by physical stores, and the physical store market remained vibrant.

“The striking thing, however, is that 10 years after the launch of iTunes and then the rise of mobile entertainment, physical formats still account for a clear majority of entertainment market sales,” Bayley said.

In 2013 physical stores accounted for £2.12 billion in sales, down just 8 percent on 2012. The number of physical outlets selling both music (8,580) and video (8,803) increased in 2013; only in videogames did the total number of physical outlets decline, to 5,590.

While the number of independent stores in the UK is still 12 percent down from their 2008 heyday, at 296 stores this segment increased their share of the physical album market from 2.4 percent to 4.5 percent. Put another way, sales of vinyl albums through indie stores have increased from just 75,700 in 2008 to 368,300 in 2013.

"2013 was another great year for independent record shops, suggesting that contrary to earlier fears, in the age of downloads and streaming, physical formats and vinyl in particular are still as relevant as ever,” said Spencer Hickman, coordinator of Record Store Day.

Edited by Alisen Downey

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