Could the Distribution Crisis in the UK Drive Digital Growth?

Hot on the heels of leading distributor EUK going into administration, Pinnacle follows, supplier of CDs, DVDs and games to the likes of HMV, Amazon and WHSmith. Could this squeeze on physical distribution be a boon for digital sales? The music retailers are certainly covering their bets: Zavvi announced the planned rapid launch of a new download store, HMV just revamped their store and Amazon’s sudden launch of their MP3 store makes more sense in the light of the Pinnacle problems.

But unfortunately much of the Christmas present custom is more likely to shift to other media rather than to digital music. The download stores of the retailers will pick up some slack, but not enough to ‘save the day’. Physical distribution needs fixing, fast. What may benefit though, are Comes With Music handset sales. Mum out shopping for her teenage kids might just be swayed towards a 5310 instead of another handset if she was planning on buying some music as well.

Ok, it’s tenuous. And that’s just the problem. When it comes to gifting consumers are pretty fickle customers: if they can’t find the CD they want they’ll get a book or DVD instead.

So the most likely net result is accelerated overall decline rather than accelerated digital sales.

1 thought on “Could the Distribution Crisis in the UK Drive Digital Growth?

  1. Catching up on all your RSS feeds here Mark so you may get multiple comments.

    The physical situation is a joke at the moment and it’s since got worse since your post.

    I think there will be a sharper decrease in Q4 sales than anticipated for 2008. I think 2009 will be an even tougher year, however, I think this is short term, and over the next 3/4 years are I believe the proposed legislation will be introduced from OFCOM/GVT regarding ISP’s and we’ll start to see a different ball game out there (a SLOW down in piracy). Alongside this and more immediately, the “credit crunch” etc, basically the decrease in disposable income would encourage consumers to take more advantage of free services, coupled with the deals ongoing and negotiations with new models, be them ad funded or subscription, would eventually lead to more consumer choice and more consumer demand.

    I’d like to point out, the physical distribution system is a killer for some labels. Some companies especially the big ones, were taking bigger slices of the pie than the creators. I think digital deals are more fair. My opinion on the valuation of music / role of physical sales has changed rapidly over the last 18 months. It’s silly to think digital isn’t going to be the future, there are major advantages for this, most of the rights owners I know are now embracing these.

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