The future of the U.K music industry

With high street music retailer HMV going into administration consumer analyst Craig Armer predicts that the entertainment market will fall by 9%, roughly £300m this year.

The double impact of advancements in file sharing capabilities and increased competition from supermarkets and online retailers has led to HMV’s slump in sales, its slow demise noticeable over the last few years with the retailer selling off assets such as Waterstones and the Hammersmith Apollo venue to pay off debts. Keen to keep HMV afloat Universal Music propped up the music chain 2011, however it seems that none of the big labels, Universal Sony and Warner, are willing to come to their aid at present.

Since the explosion of online music sharing technology in the early noughties physical and digital album sales have suffered in the U.K, falling by 5.6% in 2011 after consecutively dropping 7 years, the trend being echoed in the falling revenues of the major recording labels, with British recording label EMI being taken over by its US competitors in 2012.  Physical album sales alone dropped to £685million, a decrease of 13% despite CDs still being consumer’s preferred format, accounting for 76.1% of sales in 2011.

It isn’t all doom and gloom however, as the overall value of the industry was £3.8 billion in 2011 achieving 5% growth that year, and witnessed growth of 20% in digital sales.  Furthermore the decline of the recorded music market has slowed considerably from -9% in 2010 to -3% in 2011 and live performances reached a record £1.6billion, an increase of 15% from 2010.

So what do the statistics reveal about the current state of the UK music market?

It seems that rather than relapsing the music industry is being restructured and broadening its scope, this can be seen from growth in areas such as live music, digital sales, merchandise, advertising, music lessons and record labels revenues outside of CD and digital sales. As with any industry whilst going through such a period initially there will be a dampening effect as the market adjusts, however in order to recover the industry must lock down licensing rights on all digital platforms before loopholes are further exploited by advancing technology.

Additionally the focus should now shift on access to music as opposed to purchase.  This is a difficult task as there are many ways for consumers to download or stream music for free. There is now the danger that intermediary companies like record labels will cease to have a part to play in online sales unless they find a way of diversifying their digital revenues streams as consumers are more and more frequently taking music directly from the source itself. Licensing can help to limit illegal downloads but the focus should be on revenues streams from advertising and creating other types of music platforms that offer the consumer services that cannot be stolen.

Another area that has potential is live music, the U.S saw concert ticket sales triple from $1.5 billion to $4.6 billion over the period of 1999 to 2009 and the U.K saw consumer expenditure on live music increase 7% in 2011.  The beauty of live music is that the experience can not be stolen or recreated easily, and given consumers are now more interested in purchasing experiences rather than physical products the prospects look promising.  Having said that it also must be noted that consumers are becoming increasingly fussy and fickle, live performances now need to place as much emphasis on the entertainment factor as they do on the actual music itself.

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