The UK physical entertainment market declined by 21% in 2019 as spending continues to move away from retail and towards streaming services threatening the future of specialist chains. These retailers must manage what is a terminal decline, taking wins where possible and by shifting their focus to more sustainable markets such as electricals.
More streaming subscriptions are available, and consumers are facing a difficult decision regarding which services to invest in and for retailers, understanding where there is still demand for retail goods and how these developments in streaming services can be utilised is essential to combat declining sales. Netflix is expected to have overtaken Sky in 2018 in terms of the number of subscribers it has, but despite its success, Netflix is facing greater pressure to provide the best service on its platform with new content. Unlike Amazon Prime, which can actively encourage digital retail entertainment purchases to supplement its streaming service, Netflix is limited to a more fixed catalogue with no option to rent or purchase TV programmes and films not included in the subscription.
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With Disney and Apple both establishing their own video streaming services and restricting rights for other providers to stream content, consumers must subscribe to multiple services or find other ways to access content not available on their chosen video streaming provider. Retailers such as Amazon are already making strides to combat this, including add-on subscriptions for its Prime Video services, such as hayu, StarzPlay and ITV Hub+. This, while still very costly given that add-on services start from an additional £3.99 a month on top of an Amazon Prime subscription, places content in one location, enhancing the experience for consumers. For retailers without their own streaming service, such as HMV and independent specialists, being reactive to which content is not available could aid sales. For example, Disney has removed most of its content from Netflix and Amazon Prime Video in anticipation for the launch of Disney+ later this year. As a result, retailers should focus on Disney titles, promoting the keepsake nature of these items, and enabling shoppers to watch content that they may otherwise not have access to via subscription services.
Video streaming services are not the only areas within the entertainment market that are facing changes. In 2019, Microsoft released the Xbox One S All-Digital Edition– a console without a disk drive that shifted consumers to look to digital content and its own video games subscription (Xbox Game Pass). With Google also making a play for this market with its own subscription-based offer, Stadia, retailers operating in this sphere must learn from the mistakes of specialists in the music and video categories, such as HMV that fell into administration at the end of 2018 and was subsequently bought by Sunrise Records in February 2019.
Retailers operating in the video gaming market will have time to react to the changing dynamics. Gaming subscription services still lack the necessary infrastructure to ensure this software runs well, with slow broadband inhibiting the user experience and deterring commitment by shoppers at present. GAME has made strides to differentiate its business adding gaming areas to larger stores over the past couple of years and this is definitely the right move. However, GAME’s retail arm will continue to suffer from little it can do to revive the physical gaming market. It should instead shift focus to gaming accessories, including the PC gaming market to sell items that digital and subscriptions cannot replace.
In 2019, the music category was the weakest performing with spend falling 18.6% in 2018. Hit by the streaming revolution much earlier than other categories in the entertainment market, spend on both physical and digital music is in terminal decline. While some artists had removed their content from streaming companies, for example, Taylor Swift removed all her albums from Apple Music until 2017, this is less prominent in the industry in 2020 ensuring streaming services pose an increasingly greater threat to the UK music retail market. With fewer cars also being built with CD drives and fewer CD players produced, the CD market lacks support. For retailers operating in this market, focusing on areas such as vinyl provided some reprieve but vinyl spend is also likely to decline over the next five years as the trend runs its course. Over the next few years, retailers must manage the decline, shifting their focus to other areas of the retail market. For example, reducing space instore allocated to music, and allocating it to other sectors which have a more stable demand or on more trend-led items such as homewares or licensed goods topical to their specialism.
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By GlobalData
