Market Insight

Australia music service Guvera to buy Blinkbox Music from Tesco

January 29, 2015  | Subscribers Only

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Tesco is to sell, Blinkbox Music, to Australian online music service, Guvera. Tesco purchased the service from We7 in 2012 for £12 million. Although details have not been announced, Blinkbox Music is expected to be worth less than the Blinkbox Movies sale to Talk Talk, valued at £5 million. The service currently has over one million customers.

Guvera, which launched in 2010, is in the midst of an international expansion as it partnered with Chinese-based Lenovo to be its worldwide music partner on mobile devices in March 2014.  The company is also focusing its efforts on expanding into Africa, the Middle East, and Europe.

Our analysis

The deal for Blinkbox Music has immediate benefits to both parties; Guvera gains access to the previously untapped European market and Tesco is able to return to its core retail business following several years of disappointing performance.

Tesco’s recent losses, and financial scandal, have seen the retailer look to divest non-core operations that had been purchased by its previous management. Following a strategic review Tesco is looking to focus its efforts on its core business as it looks to return to growth in the very competitive UK grocery market. With the three Blinkbox digital business (Movies/TV Shows, Music, and Books) all performing badly, Tesco was unwilling to hold these assets in the hope of long term rewards whilst facing short term financial pressures.

When Tesco acquired We7 in June 2012, the music service already faced a declining user base. As of January 2011, We7 had over three million users but several changes to its business model had resulted in driving users away. Originally launched in 2007, as an ad-supported on-demand service, We7 quickly changed its business model to be a freemium service in February 2010. In September 2011 it began to offer a curated playlist service that offered users preset playlists of music rather than full on-demand access. Following the Tesco acquisition We7 was rebranded as Blinkbox Music but in its last filed accounts made a loss of £4.5 million and ended the subscription service in November 2013.

Despite its international expansion Guvera is not currently available in Europe and the acquisition of Blinxbox Music will provide Guvera with an already established user base as it enters a competitive market. The music company has seen success with its ad-supported on demand offering in Asian countries and in October 2014 reported approximately 20,000 new global users were added each day. As Guvera looks to compete with services like Spotify, Deezer, Rdio, and others, it will need a point of differentiation. The service operates under the same business model as Blinkbox Music—a free ad-supported music streaming service. The company has secured rights to local music in India and Indonesia and is looking to secure more rights deals in local music markets. That Guvera does not operate using a freemium model, instead relying on advertising revenues, differentiates it from Spotify and Deezer. However, consumers who are looking for an ad-free experience, by paying a monthly subscription fee, may not find what they want in Guvera’s service. 

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