Fast-growing digital services such as Spotify, Netflix and Steam helped entertainment retailing in 2013 deliver what is likely to have been its best result since 2009, according to preliminary year-end figures released by UK trade body the Entertainment Retailers Association (ERA).

The overall UK music, video and games market was worth £5.4 billion in 2013, up 4 per cent on 2012 when it was worth £5.1 billion.

ERA Director General Kim Bayley described the findings as “a stunning resul”t after at least five years of decline. “Retailers have invested hundreds of millions of pounds in new digital services and these numbers suggest the public is responding in their droves. New technologies have historically presented challenges to the entertainment business, but these results show how our members are helping music, video and games companies find new markets.”

ERA reported sales of videogames in the UK were up 6.6 per cent overall in 2013 while video grew by 3.7 per cent. Music sales declined 0.5 per cent.

The biggest-selling individual entertainment title was Grand Theft Auto V, which sold 3.67 million units.

The fastest growing entertainment categories in 2013 were mostly digital:

• Digital video, which includes iTunes downloads as well as streaming services such as Netflix, Lovefilm and Blinkbox, grew by 40.2 per cent to reach £621.4m;
• Music streaming, which includes the likes of Spotify, Deezer, O2 Tracks and bloom.fm, grew by 33.7 per cent to £103 million;
• Digital games, which covers mobile gaming as well as PC and console downloads, grew by 16.4 per cent to £1.18 billion.

The best-performing physical formats were Blu-ray video up 10 per cent to £251.8 million and vinyl albums whose sales more than doubled (up 101 per cent) to £14.6 million.

According to Bayley, the big picture growth story in entertainment is clearly digital, but the success of Blu-ray and – most astonishingly vinyl – demonstrated that physical formats could still flourish when they are able to offer something distinctive.

Videogames increased its lead as entertainment’s biggest sector during 2013 and now accounts for 41.4 per cent of total entertainment sales with video on 38.9 per cent and music on 19.7 per cent.

The entertainment market is still predominantly a disc-based physical market with physical formats accounting for 56 per cent of sales in 2013. The most digital market is games where 53.7 per cent of sales are digital. Music is 48 per cent digital, while in video nearly 70 per cent of sales are still on disc-based formats.

Media coverage of the games market in 2013 was dominated by anticipation of the November launches of Microsoft’s Xbox One and Sony’s PS4 consoles.

In the event these launches came too late to rescue the hard-pressed physical games market which ended the year 2.9 per cent down on 2012. What they did achieve was a huge boost to retailers in terms of console sales – which are not included in ERA’s estimates of overall market value.

The Xbox One sold 364,000 units worth £144.5 million, according to GfK Chart-track, while the PS4 sold 530,000 units worth £181.6 million. But to put these into context, even together they were worth less than half the value of the digital games market, which was worth £1.18 billion in 2013.

Bayley noted that games continue to deliver digital sales strongly, but that it was disappointing that Xbox One and PS4 came so late in 2013 and then huge demand meant stock sold out quickly. “Retailers will be working hard in 2014 to maintain the sales momentum of these two great new pieces of kit,” she advised.

Preliminary figures suggest video enjoyed its first growth since 2008 in 2013 – thanks to digital.

Sales of physical formats declined 6.8 per cent to £1.44 billion, but digital sales value grew by 40 per cent to £621 million reflecting the rapid growth of streaming services such as Netflix, Lovefilm and Blinkbox.

The biggest-selling video of the year was Skyfall which sold 2.96 million units worth.

Bayley said that video had done well to maintain its physical presence while enjoying strong digital growth. “The challenge for video companies in 2014 will be to establish attractive physical formats which offer digital copies which enable them to hang on to valuable store space.”

Music’s 0.5 per cent decline was a marked improvement on recent years, but will come as a disappointment to many retailers after a year of significant investment by digital services,said the ERA.

Innovation and investment by streaming services brought a 33.7 per cent increase in subscription revenues to £103.1 million according to BPI estimates, meaning the nascent streaming market already accounts for nearly 10 per cent of consumer revenues in recorded music.

“Streaming services are driving a revolution in the music market,” said Bayley.

The biggest-selling album was Now That’s What I Call Music 86 which sold 1.2 million copies. Its sister titles – Now…85 and Now…84 – were the second and third biggest-selling albums of the year respectively.

Bayley suggested that music’s performance was primarily as the result of a weak release schedule, which was particularly disappointing given the huge investment by digital services in music’s future. 2011’s biggest-selling artist album was Adele’s 21 which sold 3.9 million copies. 2012’s biggest-seller was Emeli Sande’s Our Version of Events which sold 1.4 million. In 2013, One Direction’s Midnight Memories sold just 715,000 copies. “Retailers will be hoping that labels deliver bigger hits in 2014,” she advised.

Of the Top 20 best-selling entertainment titles in 2013, 13 positions were taken by videos, five were videogames and two were music albums, both of them editions of the Now… compilation series.

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