Entertainment subscribers overtake buyers in UK as new digital services are turning the UK into a country of subscribers rather than entertainment buyers as music follows video and games to become a majority ‘rental’ market for the first time, according to figures in the latest Entertainment Retailers Association (ERA) Yearbook.
Revenues for paid-for music subscription services rose 38% in 2018 to £829m and now account for 62% of total recorded music revenues. Ownership formats like CDs, vinyl LPs and downloads now only account for 38% of revenues.
Key to the growth in people paying for access to music rather than ownership in 2018 was streaming services like Spotify, YouTube and Deezer converting their free tier users into paying subscribers, while Amazon introduced many more of its customers to its music streaming service through the success of its Amazon Echo smart speaker.
Games first became an ownership market in 2016, followed by Video in 2017 with the rise of Netflix, Amazon Prime and Sky’s NOW TV. This Subscription-Video-On-Demand (SVOD) sector grew by 31% in 2018 and is now responsible for over 55% of total video revenues. Music has now joined the party to become a majority rental market.
ERA CEO Kim Bayley said, “This is a significant moment. For the first time since the birth of the modern entertainment business in the late 1950s, more revenue is coming from payments for access rather than purchase in all three sectors – music, video and games. New digital services have created a ‘Generation Rent’ for whom access models seem natural. It is nothing less than a revolution in the entertainment business.”
The UK’s entertainment consumer now spends over £4.5bn annually on accessing music, video and games, rather than paying to own it. The three sectors have adopted access models in different ways, but it means that video in particular has gone full circle – from a rental-based business at the dawn of VHS to an ownership model with DVD and now a subscription / rental model.
| HOW RENTAL FORMATS NOW DOMINATE ENTERTAINMENT (£m) | |||||
| Spend on access | Spend on ownership | Total | % Rental | % Ownership | |
| Music | £829.1 | £505.8 | £1,334.9 | 62.1% | 37.9% |
| Video | £1,469.2 | £868.8 | £2,338.0 | 62.8% | 37.2% |
| Games | £2,251.9 | £1,612.0 | £3,863.9 | 58.3% | 41.7% |
Source: ERA Yearbook
The internet now accounts for 85% of UK entertainment revenues
The ERA Yearbook confirms that UK entertainment revenues grew for the sixth consecutive year in 2018 to an all-time high of £7,536.8m, up 9.4% versus 2017. Key to that growth was digital which now accounts for 76.1% of revenues compared to 20% in 2011. Add in home delivery services like Amazon and around 85% of total entertainment retail revenues are now generated over the Internet.
Console games and vinyl are physical’s most buoyant formats
Continuing pressure on traditional physical formats is the mirror-image of the rise of digital, but together the top three physical formats – console games, DVD and CD – still generated sales of over £1.5bn in 2018.
Two physical formats stand out – console games and vinyl LPs. Nearly £765m was spent on console games in 2018, a decline of just 2.8% year on year, making it the largest physical format segment across the music, video and games categories.
Spending on vinyl formats grew by a relatively modest 4.4% in 2018, but this comes after a remarkable 10 consecutive years of growth during which the vinyl album market has grown from just over 220,000 units in 2008 to more than 4.3m in 2018.
| ENTERTAINMENT’S BIGGEST PHYSICAL FORMATS | |
| Format | 2018 value (£m) |
| Games console software | £764.2 |
| DVD | £466.9 |
| CD albums | £289.1 |
| Blu-ray | £130.4 |
| Vinyl albums | £91.3 |
| 4K UHD | £19.6 |
| Physical singles | £2.8 |
The shifting format mix has affected different retailers in different ways. Supermarkets in particular are under pressure, though they still account for around 40% of the physical video market and a quarter of physical music sales. More buoyant are the fortunes of the independent sector, where the continuing surge in demand for vinyl has seen the number of indie record shops increase to 425 – the highest total for 12 years.
