Music has become a majority ‘rental’ market in line with video and games, according to the Entertainment Retailers Association.
New figures in the ERA Yearbook show that subscription now accounts for 62.1% of total recorded music revenues. Revenues for music subscription services were up 38% in 2018 to £829.1 million.
Ownership formats like CDs, vinyl LPs and downloads now only account for 37.9% of revenues (£505.8m). The total recorded music market is £1.334 billion.
Growth has been driven by platforms including Spotify, YouTube and Deezer, who are converting free-tier users into paying subscribers. ERA added that Amazon has introduced “many more” of its customers to its music streaming services – Amazon Music Unlimited and Amazon Prime Music – thanks to the Echo smart speaker.
Games first became a majority access rather than ownership market in 2016, followed by video in 2017 with the rise of Netflix, Amazon Prime and Sky’s Now TV. Subscription-Video-On-Demand (SVOD) grew by 31% in 2018 and is now responsible for over 55% of total video revenues.
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.”
It is nothing less than a revolution in the entertainment business
Video has gone full circle in its return to rental, which was behind the ‘80s VHS boom. According to IHS Markit, though, the physical UK video rental market was worth less than half a million pounds by 2001. There were no comparable rental models in music and games.
Overall, entertainment consumers are now spending over £4.5bn annually on accessing music, video and games, rather than paying to own it.
Bayley added: “Innovation and investment by digital services and retailers has literally proven a lifesaver for the video, games and music businesses, creating new business models and supporting jobs across the UK creative industries.”
The ERA Yearbook also confirms that UK entertainment revenues grew for the sixth consecutive year in 2018 to an all-time high of £7.537.8bn, up 9.4% versus 2017.
Digital now accounts for 76.1% of revenues. If home delivery services such as Amazon are included, around 85% of total entertainment retail revenues are now generated over the Internet.
The top three physical formats – console games, DVD and CD – still generated sales of over £1.5bn in 2018.
Spending on vinyl formats grew by 4.4% in 2018. It follows 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.
The continuing surge in demand for vinyl has seen the number of indie record shops increase to 425 – the highest total for 12 years. HMV has also led the way with vinyl and plans to increase its range.
Supermarkets now account for around 40% of the physical video market and a quarter of physical music sales.