books

Books, Music, Video, & Games

Industry Insight

Date December 2015

Approximate net recovery on cost

Synopsis

Current Trends:

  • Digital continues to upend distribution models across the book, music, gaming and film industries
     

Key Statistics

  • Industry revenues: $27 billion (book publishing); $86 billion (film and video production and distribution); $41 billion (video game manufacture and distribution); $2 billion (music stores)
  • Major product categories: Books, DVDs, CDs, electronic games, digital media
  • Significant companies: Sony, John Wiley & Sons, McGraw-Hill, MGM, Paramount, Microsoft, Nintendo
  • Recent sales trends: U.S. retail sales for sporting goods, hobby, book and music stores, a potential measure of toy demand, increased 5.9% in the first 10 months of 2015 compared to the same period in 2014 
     

Digital book sales slowing: With e-book sales increasing by 1,260% between 2008 and 2010, the future of printed books seemed in doubt. Then Borders declared bankruptcy in 2011, solidifying the fear. But recently released statistics from the Association of American Publishers is leaving many to guess again. During the first five months of 2015, e-book sales fell by 10 percent, and in September 2015, e-books were still just 20 percent of the market. This bodes well for a publishing market that had braced for a complete upheaval of the industry but instead found itself still with a competitive edge. On the other hand, e-book subscription services, many attempting to mimic the success of Netflix and Hulu, have shut down as some readers returned to books or only occasionally read on an e-reader. Even Amazon, a pioneer in the e-book industry, opened its first brick-and-mortar store in November 2015. Distributors of books have been heartened by the news and have seen increasing demand for printed materials.
 

Streaming services facing rebellions: The distribution chain for music has change radically during the past decade. Today, digital music accounts for 61 percent of U.S. music revenue. Growth in the industry is expected to come from streaming services, including Spotify and Pandora. However, while streaming services benefit the company hosting the platform, musicians have complained that they do not see the same profit from streaming services as they do from album purchases or song downloads. While most musicians do not have the name recognition to refuse to stream their music, some, notably Taylor Swift and Adele, have not made their most recent albums available on streaming services. While this trend of artists refusing to accept the terms of streaming services is currently limited to a few artists with already-large fan bases, it could mark a shift in control if other artists join the revolt and trigger yet another change in how music is delivered.
 

Movie production and distribution undergoing massive changes: The film industry is adapting to consumers spending less time and money in cinemas and more on home entertainment systems and streaming services. From 2004 to 2014, tickets sold fell from 1.5 billion to 1.3 billion, and they are expected to fall further. Instead, consumers are streaming and purchasing films to watch at home, and PwC predicts that home entertainment spending will exceed movie ticket sales in 2017. Responding to the rise of on-demand entertainment, companies such as Netflix are aiming to disrupt traditional movie distribution channels by negotiating deals with producers to release digital content exclusively to subscribers months before physical discs hit the shelves. The company has even negotiated to release some content directly to the streaming service, including Adam Sandler’s new movie The Ridiculous 6, which releases exclusively to Netflix in December. 
 

Mobile and digital delivery changing video game distribution: During the first three quarters of 2015, digital sales of games outpaced physical game sales. New game releases usually see strong sales, but physical sales of games, including Halo 5 and Star Wars: Battlefront, were weaker than anticipated. The maker of the latter, Electronic Arts, Inc., saw its stock fall 4.8 percent, to $68.98, when it was announced on November 23, 2015 that sales had been weaker than expected. GameStop Corp., the largest specialty video game retailer, has also seen its profits fall as consumers either purchase gamesonline or switch to playing games on their mobile devices, bypassing the need to buy separate gaming hardware. Overall, U.S. retail sales for electronics and appliance stores, which can indicate demand for entertainment and games software demand, decreased 1.9 percent during the first 10 months of 2015 compared to the same time period in 2014.