Tesco Acquires We7

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Within a few weeks, Streaming Media Europe readers in the U.K. might be able pick up a personalized streaming music service along with their ale and crisps at a local Tesco store. The supermarket giant bought a 91 percent stake in We7, backed by Peter Gabriel and investor Steve Purdham, for just under eleven million pounds sterling (£10.8 million). Tesco aims to purchase the remaining 9 per cent of the company in coming weeks.

The retailer also bought a stake in Blinkbox last year, so the foray into personalized recommendation radio, along the lines of Pandora or Spotify, puts Tesco -- the third-largest retailer in the world -- on near-equal footing in terms of media service and product sales as its larger rival, Walmart.

According to The Guardian, Gabriel and Purdham founded the We7 streaming audio service in 2007, and Gabriel is expected to make about £2 million from the deal.

Given Tesco's profit in the 2010 fiscal year, north of £3.4 billion, the purchase of We7 and Blinkbox could easily be looked at as rounding errors or small experiments. Yet the consolidating marketplace for audio and video streaming of premium content tells a story that Tesco may be trying to get in front of.

The purchase of We7 comes at an opportune inflection point for the U.K. streaming industry, on the heels of the launch of the Official Streaming Chart, a measurement of weekly streaming music listens compiled by the Official Charts Company. We7 is one of the companies from which listens are compiled, alongside Microsoft's Zune (via Xbox Live), Napster, Spotify, and two others.

With U.S.-based Rhapsody acquiring Napster earlier this year, and France-based Deezer expanding in to the U.K. market, the Tesco purchase looks as much like a defensive play as it does a way to drive sales of physical media and streaming services.

Retail giant Tesco also enters the market at a point where audio streaming is rapidly growing in the U.K. According to the Official Charts Company, 2011 use of music streaming topped 2.6 billion streams. Labels are also more reliant on the streaming services for revenue, according to a press release from the Official Charts Company, noting that a recent BPI survey indicates that streaming services account for £35 million (an annual increase of 30 percent, accounting for 4.5 percent of U.K. music industry revenues).

"This is a true coming-of-age moment for music streaming in the U.K.," said Martin Talbot, managing director of the Official Charts Company. "Services such as Spotify, Deezer, Napster, and We7 have been building their audiences over the past few years and are now delivering millions of audio streams every week to hundreds of thousands of music fans."

Saying that the Official Streaming Chart will provide "transparency on exactly what music fans are listening to on these new services", Talbot announced an inaugural Top 10 in early May that included the likes of David Guetta, Rihanna, Ed Sheeran, Coldplay, Jessie J, and Gotye.

Tesco's also not exactly a laggard when it comes to physical DVD sales, with at least a nine percent market share over the past two years. The company has leveraged that sales muscle to way to offer free online streaming -- via Blinkbox -- of any physical DVD purchased in a U.K. Tesco store. The move to personalized audio streaming might just be a precursor in to a similar approach for advert- or subscription-based video streaming to take on Netflix and LoveFilm.

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