While the likes of artists, labels and publishers have been able to benefit from the increasingly streaming-orientated listening habits of music consumers, the digital revolution posed a threat to the manufacturers responsible for the production of physical media, which many are leaving behind for pay-monthly digital services.
According to the BPI, streaming has just about doubled year-on-year, from 5.2 billion tracks streamed in 2013 to 10.2 billion at the same time this year. Users of streaming platforms such as Spotify, Deezer and Rdio are streaming around 300 million tracks every week.
And as a result of the digital revolution, which is increasingly centered around a crowded streaming sector, various commentators have become increasingly cynical about the general state of the physical market. But manufacturers remain incredibly optimistic - and maintain that the health of their industry is not all that bad.
By adapting to market trends and focusing on premium quality products, key players in the physical market believe they can more than survive for the foreseeable future. Here, we speak to representatives from the manufacturing sector about the opportunities and challenges they have been presented with recently.
“The doom and gloom surrounding the whole digital arrival for manufacturers seems to have died down and everyone is getting on with making things,” says Will Appleyard, sales director of Clear Sound and Vision (CSV).
“There’s obviously an opportunity with the vinyl boom and the box set market appears to be healthy too. We are working with many labels outside of the UK and indeed outside of Europe right now, as labels fight for every inch of vinyl capacity they can get their hands on.”
Clear Sound and Vision has specialised in product project management for the music and entertainment industries since 1997 and still caters for worldwide demand. The company produces CD, DVD and vinyl as well as designing bespoke packaging projects for labels in the UK and abroad. “We work with labels in Japan, US, Canada, Australia and New Zealand to mention a few,” says Appleyard.
Russell Hodgskin - managing director of specialist in manufacturing, mastering and design for the music industry, SixtySix Productions - agrees with Appleyard. “We have to stay positive [about the state of the manufacturing industry],” he says. “Don’t listen to the doom mongers! Yes, physical product is declining, but by getting creative we can prolong its shelf life for many years to come.
“Replicated CDs have declined but this was expected and the increase in vinyl, quick turn CD promos and demand for box sets has balanced this out for us,” says Hodgskin. “You tend to find that most CD releases are now available on vinyl, as well as MP3. So, yes, vinyl orders have definitely increased.”
The revived interest in vinyl has been a much-needed lifeline thrown into the torrent of streaming and download options that consumers are being offered today. And according to Entertainment Retailers Association (ERA) analysis of Official Charts Company data - vinyl sales for the year to date have already exceeded sales recorded for the whole of 2013.
ERA director general Kim Bayley called the healthy sales figures “an extraordinary turnaround,” adding that the “trend shows no sign of abating.” There have been 844,122 vinyl album sales this year, compared with 829,243 sales in 2013.
“Vinyl is king right now,” says Appleyard. “We’ve even seen the return of one or two smaller labels that dropped off a bit as their CD sales slid, but now they’re able to tap into this vinyl fever, which is great for them,” he adds.
“At a guess, 70% of what we are making must be vinyl right now. Cassettes have even started to creep back in. I’m not sure how long that little surge will last though.
“Not only have initial orders of vinyl gone skywards, but the reorders that follow come thick and fast too which never really used to be the case. CD has dribbled off a bit, but it’s still there with some decent numbers being made.”
Sound Performance managing director Chris Marksberry, says: “Vinyl orders are increasing all the time at a good rate.” The UK-based company specialises in CD/DVD replication with its large site dedicated to the independent music market, UK vinyl pressing and audiocassette duplication.
It should be noted that the increase in vinyl sales has not offset the decline of physical sales. They only amount to less than 3% of the physical albums market, nowhere near to the 97% market share enjoyed by CDs.
Marksberry is keen to put the format into perspective and in doing so highlights the fact that the physical market is still incredibly significant.
“The European market is making around two billion optical discs per year,” he says. “Vinyl production I would guess is currently less than 100m per annum.”
Marksberry’s estimate correlates with the aforementioned ERA analysis of Official Charts Company data, which shows that vinyl sales for the year to date are over 800,000, with that number expected to reach one million by the end of Q4 - four times the number of records sold in 2008. And with retailers boosting their marketing activities ahead of Christmas, that number will almost certainly be reached.
Additionally, the advent of Record Store Day has presented the industry with an increasing amount of orders two to three months after the traditional Q4 sales spike, according to Hodgskin.
“[Q4] is historically busy because of Christmas. However, February and March are becoming busy periods also due to the increased demand forvinyl, CD and box set products for Record Store Day,” Hodgskin explains.
When asked if he thinks Record Store Day will continue to drive up demand for physical formats, or if the novelty of the event will eventually wear off, Hodgskin says: “Who knows, but let’s enjoy it while it lasts! The demand is showing no signs of slowing down at the moment.”
In spite of the business opportunities afforded by the vinyl boom, Appleyard tells Music Week that the increased interest in the format also presents its own challenges to manufacturers.
“[The challenge with vinyl is] not only where initial orders are concerned, but [with] those all-important, urgent re-orders,” he explains.
He continues: “The problem [is] that vinyl cannot be turned around quickly - everyone is in the same boat where that’s concerned. That said, [CSV] have some plans for 2015 which will help our clients greatly where vinyl capacity is concerned.”
Hodgskin concurs that turnaround times can be difficult: “The advantage [of Record Store Day] is obviously more business due to demand, but the disadvantage for vinyl is supply affecting turnarounds. With CD, supply totally outweighs demand, so there is no downside.”
Another potential problem is the quality of the vinyl, says Hodgskin. “[One of the challenges is the] devaluation of quality vinyl because of price cutting, where an inferior quality of product is offered for a cut price deal,” he says.
The sales director adds that clients can rest assured that SixtySix Productions won’t fall short of consumer expectations with the products they manufacture though. “We pride ourselves on manufacturing the best quality vinyl,” asserts Hodgskin. “[We give] our customers a supreme audiophile experience and the best possible quality product to hold. If you want the best you have to pay a little more for that.”
‘Packaging is part of the music experience’
Consumer demands for tangible value-for-money products are being met with the production of high-end box sets containing everything a super fan might want, from several formats of their favourite artist’s albums, to posters, books, DVDs, T-shirts and other merchandise.
“Packaging is important and is part of the music experience,” says Sound Performance managing director Chris Marksberry. The company’s creative subdivision, The Box Set Co., offers a full in-house concept, design and manufacturing service for box sets and special packaging. “Sometimes the design comes to us fully formed, [but] more often it’s a collaborative process based around design ideas, functionality and budgets,” he says.
Marksberry adds: “Box set’s are all about the extras. Rare tracks and merch items. [Sound Performance] have done some weird and wonderful things over the years. I think it’s important in a high priced box set that the contents reflect the purchase price, so quality items [have to be included] otherwise the buyer will feel short changed.”
Marksberry adds that the main costs involved with the design of the box sets are “usually the core products, vinyl, CD, DVD and the container itself,” and adds that there “aren’t any design limitations as such.”
He continues: “The main driver [of the design] is the retail price and the manufacturing budget comes out as a proportion of that.”
Sales director of OK Media, Doron Garfunkel, concedes that the manufacturing industry is in decline and says that the downward trend will continue for the next 24 months, but adds: “There is enough demand for a while yet as many people still prefer physical formats which are better suited for the gifting market and as the limited editions continue to grow in number and variety.”
OK Media specialises in the production of CDs, DVDs and USB sticks as well as providing all other surrounding services such as pre-mastering, fulfilment, limited editions, print and packaging.
“Demand for physical media continues to be in decline as digital grows ever stronger year on year,” says Garfunkel.
“We have increasingly more publishers and retailers working together with us to create products that will stand out from the crowd and offer through additional physical content to the end consumer - something that cannot be downloaded.”
Clear Sound and Vision’s Will Appleyard says that his company has seen a steady increase in demand for box sets in recent years, particularly in direct to consumer sales.
“Digital downloads and streaming are a great quick fix, but it’s a bit too disposable for many,” he says.
“There will always be a market for super fans across all genres of music and those guys will always put their hands in their pockets for the deluxe or special edition version. They demand a unique experience – something tangible and, at the very least, numbered.”
One of the deluxe products produced by Clear Sound and Vision this year is a Boris Blank box set, which contains vinyl, CDs, a book and a cassette – all packaged in a “chunky box and slip case.”
Appleyard adds: “Platforms such as Pledge and Kickstarter have made it possible for labels or artists to produce beautifully bespoke or limited edition products for their hardcore fan base, which is excellent for all involved.
“Gauging interest from the fans and raising capital in advance of manufacture is the perfect model.”