Recent UK entertainment sales figures for 2012 confirm that although physical sales are slowing, the market overwhelmingly still enjoys buying music, film and video games in the physical form of CD, DVD and Blu-ray compared to digital downloads, contributing to over 75% of market sales.
Fig 1: Entertainment market split of sales between physical CD, DVD, Blu-ray versus digital downloads, UK 2012.
All the news these days is about how digital downloads has all but killed the sale of physical music albums and DVD movies, whilst it certainly is taking more and more of the market share every year, optical discs still retain the lions share of the market, and are showing huge resilience in a market fast trending towards digital downloads.
It’s almost nine years since the launch of iTunes in the UK, and many predicted the immediate demise of the optical disc in all its glorified formats. However whilst sales of the physical format do continue to decline, interesting to note is 77.3% of the UK market share of all entertainment sales is still dominated by DVDs, CDs and Blu-ray. Yes, that’s not a typo, the optical disc formats still reign strong despite a decrease of 17.6% compared to 2011.
Fig 2: Physical sales 2012 of CD, DVD and Blu-ray by genre
Compared to 2011, total digital sales have increased by over 10% in the UK, showing continued growth figures year on year and taking the digital sales total to just over £1bn in the UK. At the same time music, film and video console games showed declines of 14.9%, 11.4% and 26.4% respectively. But CD sales, mainly music releases still dominate over digital sales, with a 62% market share compared to digital, whilst optical discs as a whole, (this to include all physical formats) continue with 77.3% of overall market sales as compared to digital downloads which have a market penetration of 22.7%.
The majority of this digital market share continues to be in the videogame sector which account for over 50% of digital sales, with the remaining being made up by music and films.
Fig 3: Digital entertainment sales by genre 2012.
The landscape of videogame retailing has changed drastically, due to an increase in direct online sales, with video game manufacturers using a social online community model for retail of the game product for direct download to the computer, or games console, as well as an increasing trend of in-app or in-game purchases being offered to gamers. The outlook for a bricks and mortar video game retailer does not look good as the new model really only works in the online environment.
With video downloads growing faster at 20% than music at 15%, video appears to out perform music but video is a new to the market so will show initial high market share figures as compared to digital music. However a 15% growth for the established digital music sector is nothing short of phenomenal either.
Fig 4: Combination of UK physical and digital entertinament sales 2012.
Overall sales for the entertainment industry were down 12%, to about £4.2bn. Some one-off factors do contribute to the trend of general decline.
Many big music, film and video games releases were not made during the summer of 2012 as the London Olympics dominated the UK news and many companies decided to avoid any major product launch during the summer months.
The UK market still has an appetite for physical purchases over digital, but that also depends on the film studios providing A listed entertainment to for the discerning consumer to purchase. The second half of 2012 provided proof of this appetite, as the releases of hit movies The Dark Knight, The Hunger Games, Avenger and Prometheus saw an increase in the sales of Blu-ray and DVD.
If the entertainment companies can tweak their release schedule whilst at the same time improving on the quality of releases and content, then certainly there is an active and hungry market that wants to purchase a higher-value physical item be it packaged DVD or Blu-ray case, especially when it is provided with more collection value and special packaging as a box-set or limited Blu-ray releases title.
Already signs show that the entertainment industry have taken active note and showing a ability to adapt fast with the recent 2013 sales figures of grade A listed movies doing very well with titles such as The Hobbit, Les Misérables, Zero Dark Thirty, Skyfall and Life of Pi.
Blu-ray sales of these titles are anywhere from 45-56% of the market share and certainly with 3D versions of the releases only available in blu-ray format helping with the push for Blu-ray to become the dominant video format over DVD video.
Fig 5: Graph showing the stark increase in the popularity and unit sales of vinyl albums in the US market 2012. Source: Jake Brown, Glourious Noise.
A medium that was previously thought obsolete by the early 2000’s is vinyl. Recent sales figures show vinyl over the last sixty months gaining year on year popularity and with record sales reaching 4.6 million album sales in 2012 in the US market. An increase of 18% on the previous year at 3.9 million units. It makes a small but noticeable dent in the overall US sales market share representing of 1.4% of all album sales, and 2.3% share of all physical album sales.
Since the launch of digital downloads, consumers now have a choice to download individual tracks rather than entire albums. In the USA, the total number of single tracks downloaded in 2012 was 1336 million. If we average out an album to contain 10 tracks, then this is the equivalent of 133.6 million digital albums.
Perhaps the most surprising trend is the massive digital market share captured by the videogame industry, this looks to dominate the digital sphere as well as gain on the physical units sold as more and more game developers look to the social online model for direct games sales and in-app purchases.
The UK market still prefers physical album sales to digital downloads, but the flexibility on offer by being able to download individual songs, keeps the digital music download sector very buoyant and making further inroads into the physical market, however, the number of online sales through iTunes does seem to be reaching a plateau as the increase in sales is slowing.
The digital download video market is growing at the fastest rate, with a 20% increase, and this will continue as more and more people start using online streaming services such as Netflix which stream straight to the main TV in the home, currently however digital downloads make a small dent at 6% on the overall video market as consumers still prefer purchasing a physical DVD or blu-ray due to the lack of internet or network enabled televisions in the home.
Sources: ERA, Home Media Magazine, Nielson, Billboard. Glorious Noise, Digital Digest.
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