Companies in this industry operate physical retail locations that sell new prerecorded CDs, DVDs, and vinyl records. Major companies include Trans World Entertainment (operator of FYE and other branded stores), Hastings Entertainment, and CD Warehouse (all based in the US), as well as Groupe Fnac (France), HMV Group (UK), and Sanity Entertainment (Australia).
Despite the rising popularity of digital music around the world, physical format sales account for 51 percent of global recorded music revenue, or nearly $8 billion, according to the International Federation of the Phonographic Industry (IFPI). Major markets include France, Germany, Italy, the UK, and the US.
The US music store industry includes about 2,400 stores with combined annual revenue of about $2 billion. Key challenges for the industry include competition from digital downloads and mass merchandisers.
Consumer spending and entertainment trends drive demand. The profitability of individual companies depends on effective merchandising and competitive pricing. Large companies have advantages in purchasing, distribution, finance, and marketing. Small companies can compete effectively by stocking specialty products, providing superior customer service, or serving a local market. The industry is concentrated: the top US 50 companies account for more than 70 percent of industry revenue.
Traditional competition for music stores includes consumer electronics stores, mass merchandisers, warehouse clubs, Internet retailers, Internet Radio, and mail order clubs. Internet sites facilitating or selling direct downloads of music are changing the dynamics of the industry by replacing CD sales....