ERA CEO Kim Bayley called it “the Christmas from hell”. And HMV blamed dismal December trading – albeit more in video than music – for it going into administration just after the festive season. So what went wrong with what's traditionally the most wonderful time of the year for the music business?
Well, the 2018 stats certainly made for sobering reading. According to the Official Charts Company, All Albums Sales (which includes downloads, as well as physical product) for the period were down 23% on 2017. That was such a drop that even All Albums AES – which includes streaming figures – was marginally down year-on-year for the quarter, despite strong growth in Q1, 2 and 3.
But there’s a bigger picture than that. Writing on the ERA blog, Bayley noted: “If you are in a sector like entertainment, which tends to have a bias towards the fourth quarter, it is entirely possible that you will rely on the Christmas season to bail out your entire year. Look at the arithmetic. If the year’s sales were equally spread across the year, then 8.33% of your annual sales would take place each month. In entertainment, however, it’s never quite like that.”
Indeed, according to ERA, music delivered 22.1% of its physical sales in December. And OCC stats show that All Album Sales were still over six million units higher in Q4 (15,223,154) than they were in Q3 (9,149,818), meaning the Christmas gifting season still remains hugely important for retail – and therefore for record companies.
“The big albums in Q4 sold a phenomenal volume physically,” said David Hawkes, MD of Universal Music UK’s Commercial Division. “The independent [retail] sector is much less reliant on Q4 than it was 10 or 15 years ago. What with Record Store Day and National Album Day, there are a number of events going on throughout the year that keep the record-buying public interested in the physical product. December is becoming less important as a month of the year but, if you look at best-sellers and the split of sales, artists like Take That and George Ezra still delivered huge volume in that period.”
The biggest selling artist albums in the last two years have not been Q4 releases, with Ed Sheeran’s ÷ (Asylum/Atlantic) and Music Week Artist Of The Year George Ezra’s Staying At Tamara’s (Columbia) both released in Q1. 2018’s biggest-selling album overall was The Greatest Showman soundtrack (Atlantic), which was released in Q4 2017, but only became a phenomenon in Q1 2018.
“With streaming there are fewer peaks and troughs in the market,” said Derek Allen, Warner Music UK’s SVP, commercial. “It will be a natural part of the market as it evolves that those big peaks we’ve seen historically will diminish as streaming takes hold. But Q4 will still be a critical point for the industry for the near future.”
The survival of HMV is seen by many as crucial if physical music is to remain a significant part of the UK market. If HMV disappears, history suggests as much as 50% of the chain’s sales could vanish as well. Spontaneous gifting purchases, difficult to replicate online, would likely be badly hit. But Sony Music UK’s VP of market planning & media, Charles Wood, said the move to digital was creating a more stable financial picture for many labels.
“Many years ago, almost our entire year [came down to] eight weeks in November and December, that’s where we made all our profit,” he said. “It’s a much easier environment where you are having success and making money in each quarter.
“The market is getting flatter,” he added. “That’s not to say the last quarter isn’t important. But I don’t think we’re at the stage where a good Q4 will necessarily save an otherwise average year.”
But it can certainly make a good year even better – and that's why everyone in the biz will be hoping Christmas 2019 turns out a lot merrier.
* To read Music Week’s full, exclusive analysis of the 2018 sales figures, see this week’s print edition of Music Week, available now, or click here. To subscribe and never miss a vital music biz story, click here.