DIGITAL ENTERTAINMENT Sliding Shares

“DYING” SIGHTS AND SOUNDS Both record stores and DVD, game and video rental retailers were included on IBISWorld’s 2011 list of dying industries. Record stores would lose 39.7% in revenues and 11.6% of existing stores would close by 2016. For DVD, game and video rental retailers, the projected declines were 19.3% and 11.2%. DVD, game and video rental retailers were also predicted to lose the most revenue, 13.8% per year through 2017, of the 10 industries listed on IBISWorld’s 2012 list of dying industries.

MUSIC STORES MISSING IN ACTION During the first decade of the 21st century, many of the largest record store chains closed: Tower Records and Sam Goody’s, 2006, and Virgin Stores, 2009. When Apple launched iTunes during 2004, physical music sales were 98.4% of the market. By 2012, physical music sales were 39.9% and digital downloads 40.4%. During 2012, there were approximately 2,000 independent music stores, generating sales from the growing popularity of vinyl albums. Sales increased 39% during 2011 and 18% during 2012.

MOVIE RENTAL ROUNDUP Movie rental sales increased 10% during Q1 2013, but consumers were renting just as many movies from physical stores as pay-TV video-on-demand (VOD), at 18% each. DVD rentals were expected to remain popular among Americans because rates are approximately 25% or lower than VOD and DVDs represent a significant portion of movie studio profits. Most movies are rented from kiosks, with Redbox accounting for a 38% share during Q1 2013. Total kiosk sales decreased 3.5% and brick-and-mortar stores 12.55%.

TV AND NETFLIX ARE BIG WINNERS Americans are still loyal to TV, as 59% watched a movie on network TV, 81% watched primetime network programs and 65% cable channels during Q1 2013. 59% of viewers were also watching movies on DVD or Blu-Ray Disc. 19% were watching movies on a subscription video- on-demand (SVOD) service, such as Netflix and Hulu. During Q1 2013, SVOD viewership of TV shows increased 34%, with Netflix accounting for 89% of all SVOD subscribers. It is estimated that eventually one-third of all Americans would be Netflix subscribers.

ENTERTAINMENT EVOLUTION Record Store Day is held on the third Saturday of April, and promotes independent record stores with live performances, exclusive vinyl releases and special offers. Record Store Day 2013 recorded the largest one-week sales of vinyl records (224,000 LPs) since 1991. Approximately 90%, or 200,000 LPs, were sold at independent stores. Americans are predicted to spend 43% of all entertainment and media (music, news and related content) dollars in the digital channel by 2017, as compared to 31% during 2012.

ADVERTISING STRATEGIES Show independent record storeowners how well TV reaches music lovers of all ages that are potential vinyl album buyers. Recommend that video rental stores use TV advertising to market the low cost of renting a DVD or Blu-Ray compared to VOD and SVOD services. Show brick-and-mortar record and video stores how concentrated TV ad flights during December boost holiday sales and rentals. Encourage record stores to use TV to promote Record Store Day every April.

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