News

LONDON — Located around 65 miles outside London, Bicester in leafy Oxfordshire is far removed from the bustling world of rock and roll. Despite its lack of star power, the historic market town is nevertheless set to play a key role in the British record industry as home to the United Kingdom’s biggest distribution warehouse for physical music and home entertainment.   

Due to begin trading today (Aug. 29), the new 25,000-square meter facility is being opened by Swiss-based Utopia Music as part of a £100 million ($125 million) long-term deal with international logistics company DP World. With handling capacity of up to 250,000 units per day, operators say the state-of-the-art warehouse will distribute over 30 million CDs, vinyl records and Blu-ray discs a year across the United Kingdom and export markets on behalf of clients, including Universal Music Group, Sony Music Entertainment and [PIAS].

For Utopia Music, the opening of the Bicester site provides a much-needed boost after a troubled 12 months that has seen the company undergo multiple rounds of job cuts, executive departures, office closures, legal action over a stalled acquisition deal and the offloading of three of its businesses — Absolute Label Services, U.S.-based music database platform ROSTR and U.K.-based publisher Sentric.   

For the wider music industry, the new warehouse facility acts as further proof of the continued demand for physical music formats, driven by the ongoing vinyl boom.  

Last year, vinyl sales climbed 2.9% to 5.5 million units in the United Kingdom, marking the 15th consecutive year of growth, according to labels trade body BPI. In contrast, CD sales fell 19% year-on-year to 11.6 million units in 2022, though the format still accounted for more than two-thirds (67%) of all physical music purchases. Total revenue from physical music sales stood at £280 million ($352 million) in the United Kingdom last year — down 3.8% versus 2021 but up £9 million ($11 million) on 2020’s total, according to trade organization the Entertainment Retailers Association (ERA).  

The latest year-to-date figures from BPI, meanwhile, show slight growth across the U.K. physical music market in 2023 compared to last year, while vinyl sales are up by around 15% versus the first 33 weeks of 2022 in volume terms. The trade body says that physical music revenues are on track to record double-digit percentage growth in 2023.    

“A lot of people were too quick to write off physical and maybe now realize there is still a large and viable business here,” says Utopia Music vp of distribution Drew Hill on the eve of the new facility opening. 

Fintech firm Utopia Music has owned a large stake in the U.K. physical music distribution business since January 2022, when it acquired Proper Music Group, the United Kingdom’s biggest independent physical music distributor, for an undisclosed sum. Eight months later, Utopia bought up the assets of Cinram Novum — which provides warehouse, fulfillment and distribution services to music labels and home entertainment companies — and renamed it Utopia Distribution Services (UDS).   

Over the summer, stock has been transported from UDS’ previous warehouse in Aylesbury to the new Bicester site, which will handle 70% of all U.K. physical music sales, as well as 35% of domestic physical video (DVD and Blu-ray discs) sales each year, according to Utopia. Proper Music Group, which trades as a standalone entity within the Utopia group and provides distribution to over 5,000 indie labels and service companies, will continue to operate from its existing warehouse in Dartford.  

Hill says the multi-million-pound investment that UDS is making in physical music will help ensure the survival of CD and vinyl formats for future generations. “Lots of other distributors have either gone to the wall or they have been massively underfunded. The physical music business is still a quarter of a billion-pound industry, and it really needed someone to come in and upgrade the infrastructure to be able to support that,” he says.

Utopia Music co-founder and interim CEO Mattias Hjelmstedt says the Bicester facility “marks a new beginning for the U.K.’s physical distribution market.”   

The continuing shift away from physical formats toward streaming does, however, present considerable challenges to any company operating in the physical market. In 2022, Proper Music Group recorded revenue of £30.1 million ($38 million) for the nine-month period ending Dec. 31, down from £42 million ($53 million) in the prior 12-month accounting period, according to its latest financial records. The company says lower sales and increased operating costs were behind the £1.9 million ($2.4 million) net loss it posted last year.   

In response to inflationary pressures, Proper raised its prices for the first time in over 15 years in late 2022, with UDS also increasing prices on what Cinram Novum was previously charging clients. Hill declines to reveal how much prices have increased but is confident that the measures taken will help Proper return to profitability in 2024, while the new Bicester facility will enable UDS to grow its client base through increased capacity and a greater focus on direct-to-consumer sales.   

By tapping into DP World’s global network, which spans 75 countries on six continents, UDS will also be looking to grow physical music exports outside the United Kingdom. It also, says Hill, has long-term plans to replicate its centralized distribution model overseas, possibly in North America or Europe.    

Commenting on Utopia’s well-publicized recent difficulties, Hill says support from the Swiss-based tech firm has been “unwavering” and both Proper and UDS have been “ring-fenced” from the cuts Utopia has implemented elsewhere over the past year.   

“[CEO] Mattias [Hjelmstedt] has talked internally about how physical distribution is the engine room of Utopia. We provide a funnel through which it can present and sell its other products and services,” says Hill, who has worked for Proper for more than 15 years.   

Hill adds that he has no concerns about the financial stability of Utopia and points to the growing popularity of vinyl, deluxe boxsets and special edition releases among music fans as a thriving growth area for the physical music business.

“Over time, maybe we will start to shift fewer units, but they will be units of higher value,” he says. “As long as you create a beautiful package with valuable content in it, people will always want to buy it.”