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Cable Technology Feature Article

October 02, 2014

Tesco to Sell Blinkbox, Exit the OTT Video Game

By Tara Seals, TMCnet Contributor

Tesco shoppers will no longer be able to add over-the-top (OTT) video to their shopping lists: Tesco has put its Blinkbox online video division up on the block, just three years after buying it, and will discontinue its Clubcard video service.

The grocery retailer is a household name in the U.K., and had acquired Blinkbox (founded eight years ago by former Channel 4 and Vodafone (News - Alert) executives) in 2011 to dive into the video business, taking an 80 percent stake for an undisclosed sum. Then, it made waves last year by launching the Clubcard OTT offer as a free perk of its loyalty card program, deepening its investment in the area.

After all, diversifying into the services realm is a customer engagement gambit that has worked well for e-tailer Amazon, as it has made video streaming a key perk of its Amazon Prime unlimited shipping service. And Blinkbox would seem to have a good value proposition: it offers more than 10,000 films and TV shows on devices including PCs, Macs and tablets, and has content licensing deals with important partners including BBC Worldwide, Channel 4 and film studios such as Fox and Universal.

But according to reports, the undertaking was far more expensive than originally thought, and has failed to gain subscribers in numbers as it faces steep competition from LoveFiLM and Netflix.

And, losses were mounting. According to Blinkbox’s most recent reporting, it lost a whopping £18.5 million last year, up from £5.7 million in 2012. Revenue was £3.2 million, but the cost of sales was £4.5m, and it spent £7.6 million on research and development.

It would appear that Tesco will now refocus its efforts on its core business of selling groceries. Dave Lewis, Tesco’s new CEO, has undertaken a strategic review and has decided to pursue a sale. If a buyer can’t be found, Blinkbox will be closed.

Tesco will discontinue the ClubCard video service as well, at the end of October. The service, available to the 16 million Tesco loyalty cardholders, offers content spanning comedy, drama, kids TV, romance, thrillers and documentaries with no charges, contracts or subscriptions, as it is supported by targeted advertising based on users’ shopping habits and demographics as captured on their Clubcard. Customers were told that they would have an opportunity to shape Clubcard TV by providing feedback both on content and additional features they would like to see added—but clearly the experiment never got far enough to put this into action.

Edited by Alisen Downey

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