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ERA Manifesto Download SEPTEMBER 2018 ENTERTAINMENT 5.0 DELIVERING THE FUTURE OF ENTERTAINMENT INTRODUCTION Introduction The story of the entertainment industry is and more than half of revenues are accounted for inevitably dominated by the glitz and glamour by ‘access’ models like streaming rather than by of the product itself. And in many ways that’s selling a physical disc or a download. as it should be – music, video and games are In 2018, as ERA celebrates its 30th anniversary businesses which trade in drama and dreams representing the UK’s entertainment retailers and the utterly extraordinary. The job of curating and digital services, it is time for an update of and delivering to the public all of those millions our thinking as we approach the next stage of tracks and albums and movies and TV shows of entertainment’s evolution, a stage we call and games in multiple formats is in its own way Entertainment 5.0. equally extraordinary. This report outlines five challenges the It is that business of digital services and retailers entertainment industry has to meet if it is to which is the subject of this report, the follow-up successfully manage that transition. to 2015’s first ERA Manifesto, Shaping the Future of Entertainment. Because it is an evolutionary process, those five challenges are broadly similar to those Just three years ago many of the ideas in that we identified three years ago. Our key priority publication seemed strange and unfamiliar. remains collaboration with our content partners. Retailers had historically been seen as mere It was after all the focus on collaboration which “outlets” for the entertainment business rather more than anything proved the worth of the first than a progressive force which shapes the ERA Manifesto. entertainment experience. I am delighted to report that the music, video and In 2018 that once novel notion is now undeniable. games sectors have all responded magnificently The surging revenues of the music, video and to our call to work ever more closely together. games sectors which reached a new all-time-high More than anything else it has been the increasing of £7.24bn in 2017 are primarily attributable to closeness of our relationships with them which the new forms of consumption devised by digital has been the greatest legacy of our first Manifesto. services alongside the continuing innovation of ERA It is our warm hope that the same will prove true more traditional retailers. 2018 on this occasion. From a consumer perspective it is arguably the most diverse and healthy entertainment retail landscape the UK has ever seen. 1 Three years on from our first report, the entertainment market has changed dramatically. Nearly three quarters of entertainment market revenues are now accounted for by digital services, ENTERTAINMENT 4.0 – THE PRESENT ENTERTAINMENT 4.0 – THE PRESENT 2009 – 2018: RETAIL INNOVATION Entertainment 4.0 AND INVESTMENT THE PRESENT – TODAY’S HAS TRANSFORMED MULTI CHANNEL MULTI AND EXPANDED THE FORMAT WORLD 2009 – 2018 ENTERTAINMENT Entertainment 4.0 is the multichannel, multiformat world we live in now. INDUSTRY It ranges from the big data technology of streaming through to newly reborn formats such as vinyl and even the audiocassette. Your High Street Over 70% of today’s In video it ranges from DVD and Blu-ray to downloads and streams and in entertainment entertainment revenues gaming it ranges from mobile bite-size games to triple-A console gaming. expert come from retailers and It is co-existence at its best. Digital services and retailers targeting different groups by offering very distinctive benefits. models that did not even Entertainment how you want it, where you want it, when you want it. HMV exist 15 years ago All the music in the world 2017 available 24/7 on Instant access to multiple devices the films you love A weekend treat by download with a £7.3bn for the family copy on DVD along with the Spotify weekly shop Entertainment in Deezer any format you’d YouTube Music like it Virgin MUSIC Asda Sky VIDEO ERA Morrisons 2002 ERA 2018 GAMES 2018 Amazon +49% That last minute £4.9bn 2 3 chart CD or DVD Deep music when you need a Your High Street knowledge and gift in a hurry gaming expert a great selection of vinyl Tesco Express Sainsburys Local Indies GAME ENTERTAINMENT 4.0 – THE PRESENT ENTERTAINMENT 4.0 – THE PRESENT INNOVATION AND RETAIL EXPERTISE INVESTMENT THE PERFECT Less than two years after the launch of the Amazon Echo smart COMPLEMENT TO speaker in the UK, ERA’s Consumer Tracking Study revealed that 1 more than 18% of UK consumers are using smart speakers. CONTENT CREATORS Virtual reality specialist Melody VR is pioneering new forms of Digital services and retailers occupy a central role in entertainment’s entertainment putting music fans in the middle of live music supply chain. While labels and studios find and invest in talent, retailers 2 shows using virtual reality technology. bring the fruits of their endeavours to the ultimate consumer – the video or games or music fan. Sky Store has created an entirely new hybrid video market with Just as labels and studios are rightly proud of their record in attracting its Buy & Keep offering giving the instant gratification of a digital and marketing creative talent, so too digital services and physical retailers 3 download and satisfying the desire for physical ownership with a add their own value to the equation, aggregating and curating music, disc delivered through the post. video and games to attract and inspire consumers. As sales of physical discs have peaked, retailers have added more Talent Suppliers Retailers Public and more convenience and non-traditional outlets to maximise 4 their reach into the remaining physical market. Retail investment in new digital services is having a dramatic impact on the efficiency of the entire sector: Revenue per retail stream it BUYS: 5 employee increased from £255,000 to £458,000 between 2014 and • 1,790,000 CD’s sell the vinyl 2017. • 464,000 downloads puts the CD • 61,000 vinyl invests and markets into convenience stores STREAMS: Digital services are broadening cultural experience, transcending Ed Sheeran the recording • 781,000 album the limits of physical shelf space and offering literally tens of creates Divide sells 6 millions of pieces of content – not just benefiting consumers, the download equivalents ERA but also making available the work of countless thousands of ERA 2018 musicians, filmmakers and games producers. 2018 Platforms like Twitch have created entirely sells digital 4 new revenue streams for gamers by BUYS: 5 sells Blu-ray 7 capitalising on social media and the fan’s • 1,000,000 DVDs desire to passively partake in gaming. puts • 180,000 Blu-ray produces, markets DVD front of store • 578,000 movie Written by Jenny Bicks and finances film mail you downloads and Bill Condon the disc ENTERTAINMENT 4.0 – THE PRESENT ENTERTAINMENT 4.0 – THE PRESENT THE EXPANDING FROM OWNERSHIP TO REACH OF ACCESS TO EXPERIENCE ENTERTAINMENT Historically, entertainment retailing was about selling “stuff”, either discs or tapes, for customers to take home and play. RETAIL Propelled by the launch of new digital discs like the CD, DVD and console games for the Playstation and Xbox this traditional business reached its peak in 2004. Physical entertainment formats like the CD and DVD may be well off their Over the past decade entertainment on disc has been joined by digital peak and some notable High Street names may be no more, but physical downloads and, most radically of all, new subscription-based digital services retail has not thrown in the towel. which allow access typically for a monthly fee. Far from it. Instead physical retailers have invested in extending their reach, Streaming services add another option for entertainment fans in a similar thus maximising the remaining physical market. way that Uber has created new mobility options and Airbnb has created Retailers have more than doubled the number of physical outlets selling new accommodation options for travellers. entertainment since 2008. The addition of access models to the entertainment industry creates new Much of the increase has been accounted for by non-traditional and ongoing customer relationships with fans and the potential to generate convenience outlets offering a heavily-edited range of impulse and gift useful data which optimises the consumer experience and deepens the titles. But just as notable has been the striking revival in the number of relationship between content creators and their followers. independent record shops – up from just 299 in 2009 to 406 less than a decade later. OWNERSHIP V ACCESS Retail investment is proving the UK public’s continuing appetite for physical 2OO8 – 2O17 formats – a striking example of how retailers do not simply satisfy demand. 100% They help create it. 90% HOW THE 80% NUMBER OF PHYSICAL 15,875 70% ENTERTAINMENT 2017 60% STORES HAS DOUBLED IN 50% ERA 10 YEARS ERA 40% 2018 2018 30% 6 20% 7 10% OWNERSHIP 7,817 0% ACCESS 2008 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Unique outlets selling entertainment Source: ERA Yearbook, Official Charts, IHS ENTERTAINMENT 3.0 – THE PAST ENTERTAINMENT 3.0 – THE PAST 1999 – 2008 THE BEST ANTIDOTE Entertainment 3.0 TO PIRACY IS LEGAL THE PAST – DIGITAL SERVICES OFFERING A DESTRUCTION BETTER EXPERIENCE THAN THE PIRATE ALTERNATIVE Proof positive of what happens when there is no legal alternative to piracy came in the initial disruptive period of the internet beginning in 1999. Thanks to the relatively small file size of individual songs, music was the first sector to be affected with the launch of the original unlicensed Napster which gave music fans unlimited access to illegal downloads.
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