The recent news that Tesco has sold its blinkbox VOD service (along with Tesco Broadband, the retailer’s broadband and voice base) – reportedly for a cost of around £25-30 million — didn’t come as much of a surprise. Nonetheless, it does seem odd that Tesco couldn’t make a compelling OTT offering work.
In order to make sense of it all, IP&TV News contacted Ovum analyst Nick Thomas (Practice Leader Digital Media), who has previously written about Tesco’s digital strategy, to find out what went wrong…
IP&TV News: Were you surprised to see Tesco sell its digital businesses?
Nick Thomas: Given Tesco’s struggles in their core business, it was not surprising that the new CEO chose to divest what he considers non-core businesses. But it is a shame as blinkbox was a step in the right direction, both in terms of the home entertainment market (where Tesco was number one in the UK) shifting to digital, and indeed of encouraging customers to buy online rather than in-store (entertainment customers are more likely to do this). blinkbox paid the price for failings elsewhere in the Tesco group.
What do you think these failings were?
I’m not sure blinkbox failed. Tesco’s digital strategy didn’t perhaps deliver results as quickly as was hoped, and Amazon took share from Tesco in 2014 in home entertainment. But Amazon will seek to expand its content categories beyond home entertainment, and now Tesco won’t be able to compete digitally in an area where it was the UK market leader (in physical media at least). Tesco’s digital strategy had all the key components in place – a successful own-brand tablet, a movie service, plus books and music. But somehow the marketing and execution didn’t really click into place.
Do you expect TalkTalk to make a success of blinkbox – what does the acquisition say about their strategy?
Their strategy is canny, and by stealth they have been a big success story in providing a low-cost but attractive TV service. While BT and Sky fight for the crown jewels of sports rights, TalkTalk has pulled together a strong package with YouView, Netflix and now blinkbox all in the mix. I think it could be a success for them if they market it correctly, but TalkTalk can use its customer channels to really promote the service if they choose to.
Finally – if there was one lesson to be taken from the blinkbox/Tesco failure, what was it?
Even services with a good catalogue need effective marketing, and I’m not sure this was a blinkbox strength – it failed somehow to grab public attention despite having some strong content (eg Game of Thrones). That in turn hindered the potential development of a synergy with Tesco’s other services, the Hudl tablet, and blinkbox’s other services. It is also clear that UK consumers prefer the subscription model provided by Netflix rather than the transactional model of Blinkbox. However, there may yet be a role for such a service to complement SVOD services, provided it can get people registered and willing (and able) to pay easily.
Nick Thomas will be sharing more insight at this year’s TV Connect. As, indeed, will Will Ennett, Head of Pay TV Content, TalkTalk, which should make for an interesting opportunity to discover how TalkTalk plan to succeed where Tesco failed with their new acquisition. Click here for booking and more info.