There was a generally optimistic mood at the annual general meeting of the U.K.'s Entertainment Retailers' Assn. (ERA) today (Sept. 16), despite the challenges faced by the sector.

With U.K. album sales not suffering the collapse of some territories - earlier this year ERA reported a 3.7% volume decline in 2009 - speakers at the AGM in London contrasted the British situation with the decline of bricks-and-mortar stores in the U.S.

ERA chairman Paul Quirk stressed that entertainment retailers are not simply "conduits to consumers."

"Retailers drive and grow markets because of their unique relationship with the consumer," he said.

ERA, which launched in 1988, has expanded its membership beyond bricks-and-mortar stores and director-general Kim Bayley acknowledged the "rapid change" of the sector. Its 150-plus membership now includes download stores, mobile operators, streaming and subscription services. Clive Gardiner, senior VP digital at We7, became the first streaming service representative to be elected to the ERA board today.

Quirk called on suppliers to work creatively with retailers to secure the future of the sector so that entertainment products remain a "compelling proposition." And he noted that 88% of entertainment outlets are not entertainment stores, so that such products have to compete for space with more profitable product ranges.

Despite the boom in digital track sales, Quirk suggested that labels should not lose sight of physical sales opportunities. Referring to the 637,000 sales for the digital-only release of "Fireflies" (Island/Universal) by Owl City, he said: "I simply do not believe... that there is no demand for it on CD."

Quirk added that the returns system for physical product is a "huge waste of time, resources and money which in a declining market is verging on the farcical." ERA research suggests that for music alone the current system costs retailers £10 million ($15.6 million) a year and said the problem needs to be tackled.

"That's £10 million spent on shipping product in and then back out of stores, on handling product in store and in warehouses and - most absurd of all - on refurbishing product and replacing jewel cases only for them to be scrapped or recycled at the other end," he said.

On behalf of digital members, he stated that the "dizzying number of different licenses" required for such services was a "disincentive" to new entrants.

Guest speaker Patrick Walker, YouTube European director of partnerships, told the ERA members that popular (free) content on YouTube could drive sales. He cited Susan Boyle - although her hit album was a different proposition to the YouTube audition footage on "Britain's Got Talent" - and Monty Python. Indeed, Python's official YouTube channel amusingly outlines their decision to put official clips on the site: "None of your driveling, mindless comments. Instead, we want you to click on the links, buy our movies & TV shows and soften our pain and disgust at being ripped off all these years."

"Putting the content online doesn't cannibalize" sales, Walker said. He added that labels and rights holders need to work with YouTube or "nobody wins."

"In Germany we are having a hell of a time with GEMA," he said, referring to the licensing impasse with the German performing rights society.

In her address to members, Bayley reported that ERA had made cost savings of £100,000 ($156,000) in the 2009-2010 financial year. She also revealed that Tesco head of entertainment Rob Salter had been made chairman of the Official Charts Co (OCC) to help maximize ERA's investment in the company. ERA and BPI each has a 50% stake.

Bayley also praised the success of Record Store Day in the U.K. in April.

In addition to Gardiner, the other newcomers to the ERA board are: Kevin Lee (Morrisons), Chris O'Reilly (Presto Classical) and Alan Jordan (Reflex).