News

The digital download revolution in music and film has gradually filtered down to the packaging industry, and the impact has been less than positive.

At the end of last year AGI, the media packaging company owned by US group MeadWestvaco, said it would close its factory in Birmingham due to declining sales. And in its half-year results, published in August, the firm said it continued to be “challenged” by falling music CD packaging sales.

Meanwhile, Merseyside-based Coral Products has also noticed a marked decline in sales of CD and DVD packaging. The company blamed the increasing popularity of digital media for falling sales and is now focusing its attention on alternative business.

There has much speculation about the future of DVDs, and CDs in particular. Sales of CD singles have continued to fall since the introduction of digital downloads in 2004, according to the BPI, the body that represents the British music industry. And while album sales have not been hit as hard, numbers have still dropped since their peak in the same year.

Although DVD sales rose by 12.6% in the first six months of 2007, according to the British Video Association (BVA), digital downloads and piracy continue to impact on sales of the physical product.

Devalued discs
Martin Howell, managing director of Sarem, the Surrey-based supplier of the Super Jewel Box CD case, believes the “digital download anarchy” is only part of the problem. Howell also points the finger at newspapers and magazines that give away free CDs and DVDs. “It’s junk really and that’s devalued the whole image of the disc,” he says.

Supermarkets are another issue, says Howell, who argues that limited retail space means supermarkets only sell the chart entrants. “There are more and more people going bust or giving up because there’s no money in it [media packaging] anymore,” he says.

However, Universal Music, the leader in worldwide music sales, contests the view that the physical CD is doomed. “There’s a perception in the media that physical album sales are down. Nothing could be further from the truth,” says Universal Music commercial director Brian Rose. “Very few people download albums, they prefer to buy the physical CD.”

In July 2006, Universal Music adopted Sarem’s Super Jewel Box to package its CDs after extensive customer research showed that customers were frustrated with the frailty of the old generation of CD packaging, which had a tendency to crack at the spider and the hinges.

According to the company, digital downloads are rising, but at a measured pace. They accounted for 4.1% of Universal’s album sales up to June 2007, compared with 1.7% of the total album sales recorded for the whole of 2006 in the UK.  

Adding value is now a key part of the media packaging business. High-street retailer HMV says customers’ expectation of perceived value in physical products has grown as digital download sales have increased. Sales of DVD box sets and collectors’ editions of CDs have grown in volume as a result.

Consequently, Burgopak, which offers a patented sliding box system, has not seen a decrease in sales, as the desire to get more from a pack has grown. “We look at it as a good thing for us,” says Burgopak sales manager Murray Scott. “Basic packaging is no longer good enough.”

DVD packaging in particular has been forced to evolve as high-definition video discs, which hold even more data than DVDs, have entered the market. There are currently two forms of high-definition video systems available – the Blu-ray disc and HD-DVD.

Sarem has addressed the high-definition issue by creating the Super Jewel Box Plus, which is halfway between a CD and a DVD box and so instantly differentiates itself on the shelf. “At the moment it’s a format war,” says Howell of the two high-definition options. “The general public will decide which one it goes with.”

High-definition has created a new avenue of possibilities for the DVD sector while fears that digital downloads will be the death of album sales look to be unfounded – so far at least. The public is demanding more from the physical products it buys and it’s this desire for collectors’ editions and box sets that could ensure the future success of companies that persist in the media packaging sector.

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DOWNLOADS ON THE UP
Statistics from the BPI show the huge impact that downloads have had on the UK music market.

From a standing start in 2004, it took only a year for downloads of singles to surpass sales of physical CD singles, and in 2006 consumers bought almost four times as many downloaded singles as physical CD singles (53 million against 13.9 million).

However, digital downloads only accounted for 1.3% of the 154 million albums sold in the UK in 2006, suggesting there’s still plenty of life left in the physical format. Sales of CD albums have declined slightly in the past couple of years, but are still much higher than they were a decade ago.