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Tesco’s Clarke charges into our living rooms with Blinkbox IPTV acquisition

Tesco’s new chief executive Philip Clarke is all too aware that some of the old retail magic has faded. He described the core UK business’ performance, in his first set of financial results, as “below par on any metric”.

So what’s he going to do about it? One solution is strategic diversification into areas with better growth and margins. The foray into the second-hand car market, with tescocars.com, is a case in point. Potentially much more significant, however, is the acquisition (for an undisclosed sum) of 80% of Blinkbox.

Blinkbox? It’s a UK-based film- and TV programme-streaming website service with a catalogue of about 9,000 films which boasts over 2 million visitors a month. Sort of like iPlayer, but more ecumenical in its approach to content and, by the way, you pay £2.99 per rental item and £6.99 for a download.

And the significance of this is? The “assault on the living room” is being touted as the next big thing in retail. In the United States, it already is. Netflix, a DVD and streaming rental business set up in 1997, is now a stock market phenomenon. Last year, its value soared 33% to $12.5bn (£7.65bn). And it’s easy to see why: $161m profits on revenue of $2.2bn, and over 20 million customers who pay a flat monthly fee for the privilege of receiving its video-streamed and DVD catalogue.

Symbolic of its waxing market power, Netflix recently moved into the original content market. Spectacularly, it outbid the US TV networks for the right to remake Michael Dobbs’ House of Cards, with Kevin Spacey in the lead role of the Machiavellian FU.

But that’s over there. As yet, Netflix has no European presence, which leaves the UK market wide open to exploitation. The nearest thing here is LoveFilm, which was bought out by Amazon at the beginning of this year (valuing it at £200m). It was set up in 2003 with a subscription-based DVD rental-through-the-post service, and diversified into video-streaming last year. It has just concluded its first major content deal, which involves distribution rights to 50 Disney films.

The UK may be behind the in-home entertainment curve, compared with the USA, but Tesco’s Clarke has every reason to suppose it will soon catch up. Rapidly expanding broadband width provides the pre-condition. But someone with deep pockets, an unrivalled national customer database and a visceral understanding of distribution will provide the wherewithal. That someone could just be Tesco.

Original programme content, however, will have to wait.

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4 Responses to Tesco’s Clarke charges into our living rooms with Blinkbox IPTV acquisition

  1. Tesco in employing Philip Clarke as their top man must have known of Clarke’s non executive role at the very lowly Whitbread Plc. from 2005. One interesting aspect of Clarke’s non-executive role at Whitbread is their loyalty card scheme. Sainsbury’s operate the Nectar loyalty card and so do Whitbread! If readers of this article innocently understand this conflict of interest to be minor then maybe the assessment of Whitbread’s stunning credentials and results of the last few years may help disabuse them. Whitbread have made money with their cheap hotels and their coffee bars. Both these markets have been markets of accelerated growth for a number of reasons. Capable management alone has not been responsible for there success, and certainly not on the budget hotel side. Whitbread has had to sell off a number of well-known brands, like Pizza Hut and David Lloyd to name just two, after incurring losses. If Tesco can allow a Nectar card man from a budget hotel background to run their immensely accomplished management team, not to mention their own Clubcard; then what a powerful man Clarke must be. Am I upset? I am very upset indeed.

    DINESH R MAKWANA

  2. The above comment was moderated but this is the comment that was tendered. Whitbread are not at all liked by me in any regard whatsoever.Tesco in employing Philip Clarke as their top man must have known of Clarke’s non executive role at the very lowly Whitbread Plc. from 2005. What is rather interesting about this non executive interest of Clarke at Whitbread is the loyalty card scheme as one example. Sainsbury’s operate the Nectar loyalty card and so do Whitbread! If the other innocent readers of this article understand this conflict of interest to be minor then maybe the assessment of Whitbread’s stunning credentials and results of the last few years may help. Whitbread have made money with their cheap hotels and their coffee bars. Both these markets have been markets of intense growth for many logical reasons. This does not demonstrate tangible evidence of capable management alone and certainly not any from the cheap hotel side in particular. Whitbread has also sold heavy brands like Pizza Hut and David Lloyd to name just two asset losses. If Tesco can allow a Nectar card man of cheap hotel background success to run their immensely proud and selective management teams and let it be with respect to their own Clubcard; then what a powerful man Clarke must be. Am I upset? I am very upset indeed.
    DINESH R MAKWANA (DREAMWORDS AND INORBITS)

  3. Sy+Wyen+Bartelski says:

    Blinkx may have a future, time will tell.Loyalty card means loyalty card. I think Clarke was innocent in his duties for Whitbread and may have been a naive victim and probably did not know of basic issues of the Nectar card and Tesco Clubcard. Whitbread did have a very tiny amount of Tesco clubcard in Marriot but they sold Marriot too as an asset!!!!!!! Whitbread sold two heavy brands in Pizza Hut and David Lloyd, and both realised good money – it is correct they are world class asset losses. Whitbread could have done a lot with both. Many companies would have!!! In time, I think we will see if Clarke is a master of Loyalty but certainly the Whitbread issue has raised concerns.

  4. ANONYMOUS says:

    The video streamlining market profitability is one where costs spent on streaming rights will play a hostile role.If that balance is found and streaming is ahead of the DVD market cost base and demand, then Blinkx could just blossom.Forward thinking a yes and Tesco Clubcard please for Blinkx users! (not Nectar!!)

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