The music industry has welcomed the volumes generated by the supermarkets and now looks with hope to audio DVD

Last year one in every five albums sold in the UK was bought in a supermarket.

The grocery multiples’ share of the album market has increased steadily since 1997 when their slice of sales was recorded for the first time at 9.7%.

Between them, Tesco, Asda, Sainsbury, Safeway and - since last year -- Morrisons are selling music in almost 1,900 outlets today compared with fewer than 1,000 in 1996. Their tightening grip on music sales has hit the specialist multiples, such as HMV and Virgin Megastores, which have seen their sector’s share of the album market slip from 50.1% in 1999 to 46.9% last year [source: Millward Brown].

The amount consumers actually spent on music in all retailers was down from £2.1bn to £2.0bn in 2002 [source: BPI]

Much of the grocers’ growth has come from an aggressive pricing strategy which has frustrated the record companies who have always complained that heavy discounting devalues their artists’ music. However, their protests have become less vocal in recent years as the music industry has welcomed the huge sales volumes the mass market grocers provide. The supermarket music buyer is often the older music fan, and often a parent, who may no longer visit specialist shops.

The subject of CD pricing took another twist in September when Universal announced it was cutting the dealer price of its biggest albums by one third in the US where it is responsible for 30% of albums sold. There is still no news on when or if this policy will be adopted in the UK where the price of chart albums has slipped under £10 in supermarkets.

As with all home entertainment products, the final quarter remains the most lucrative time of the year. Almost 40% of album sales take place in quarter four around Christmas compared with only 21% in the first three months of the year.

Big releases for this Christmas include albums from acts such as Blue, Dido, Travis, ex-S Clubber Rachael Stevens and Texas. The fan bases of old favourites such as REM, Pet Shop Boys, Sheryl Crow and Michael Jackson are also being targeted through best-of compilations. Expect competition for prime space and instore marketing to be fierce in November when releases from Britney Spears, Kylie Minogue and Ronan Keating are released.

Yet it is the DVD format which is getting the record companies excited. Music DVD has, in fact, been the format’s Cinderella, struggling to attract the same retailer and consumer interest as DVD film. But with around 30% of UK homes now owning a DVD player the potential for the format to sell music is huge. More than 150 million DVD titles were sold last year but music accounted for only 3% of these units. According to Mike Brown, chairman of the British Video Association’s DVD Entertainment Group which includes representatives from all the major record companies, music is set to increase its share to at least 5% this Christmas.

To achieve this, the record companies must convince grocers to give titles more visibility in store. With music DVD’s share growing from 2% to 3% in the first half of the year, the record companies believe this is already happening. “Consumer focus groups told us they need to know where to find music DVD in store. This means stacking titles with other music product,” says Brown.

The biggest music DVD titles so far have tended to feature catalogue artists with a large fan base. They include acts such as Led Zepplin, Queen and The Beatles. This autumn, however, there are some big DVD titles from more contemporary acts, the highlight of which is a Knebworth Live from Robbie Williams, released by EMI.

While music DVD is on the up, the poor single continues its decline. Asda, Tesco and Sainsbury all increased their share of the singles market in 2002, with Asda taking 11.3% of sales with Tesco at 2.1% and Sainsbury at 0.4%. But it is a struggling market which has fallen 43% in volume since the start of this year. Asda’s share of this market puts the chain third behind HMV (18.6%) and Virgin (11.9%), hence its decision to link its own marketing to Louise’s new single last month.

The record industry is keen to save the single, which for generations has been used as a way of introducing young people to the idea of buying music as well as a marketing tool. Its long-term future, however, remains in serious doubt.