Netflix & Spotify change UK entertainment landscape driving £5.3bn revenues

Growing demand for streaming services such as Netflix and Spotify helped the UK home entertainment sector increase its revenues in 2013 for the first time in five years to £5.3bn, according to new figures.

Sales of video, video games and music jumped 4 per cent year on year in the UK from £5.1bn to £5.3bn in 2013, marking the first growth in the home entertainment sector since 2008, according to figures published by the Entertainment Retailers Association (ERA).

Internet-derived sales – which includes home delivery, digital download, streaming and other access services – were up nearly 14 per cent year-on-year to £3.18bn accounting for 60 per cent of the total UK home entertainment market.

The fastest-growing sector across the online home entertainment market was video-on-demand subscription, including Netflix and Amazon-owned LoveFilm, which was up 120 per cent on the year.

Sales of physical products from high street stores continued to decline, down 8 per cent compared with 2012. Statistics further born out as Home entertainment retailers have struggled in the face of online competition, with HMV closing 66 of its high street stores.

In contrast, TV and film streaming service Netflix grew its subscriber base in the UK and other international markets by 1.6 million in the last quarter of 2013.

The ERA director general, Kim Bayley, said: “The entertainment revolution has been driven by new and existing retailers taking huge gambles and investing in technology and new delivery mechanisms.

“This is stark evidence of the revolution in entertainment consumption being driven by entertainment retailers. The fact that 60p in the entertainment pound is now spent online and 26p in the pound is for access to content rather than ownership is a testament to the huge investment and technological ingenuity of retailers in providing consumers with new ways to enjoy the music, video and games they love.”

According to the ERA Yearbook independent record shops increased their share of the physical album market from 2.4% to 4.5% in 2013. Sales of vinyl albums through independent stores last year were 368,300, compared with 75,700 in 2008.

Spencer Hickman, coordinator of Record Store Day, the event in in which independent stores club together to support music, said: “2013 was another great year for independent record shops, suggesting that contrary to earlier fears, in the age of downloads and streaming, physical formats and vinyl in particular are still as relevant as ever.”