Tesco Joins The Battle For The Living Room

This is getting interesting. While Netflix is scaring the living daylights out of operators and rights holders in the US, on this side of the pond the battle to control the living room took a new twist with the announcement that Tesco is acquiring 80% of video-on-demand aggregator Blinkbox. Thus the UK’s most successful physical retailer - £1 in every £8 of UK consumer spend is with Tesco -  is set to compete head-to-head with the most successful online retailer, Amazon, which earlier this year took full ownership of Europe’s largest online DVD rental provider, LOVEFiLM.

Blinkbox is a canny company that has spent the last few years solidly acquiring pay-per-view video rights. Its execs are people the studios and broadcasters can do business with, and it has gone about its business quietly and efficiently. It looks like a good fit for Tesco, although the retail giant may yet keep its own white-label online DVD rental business, powered by LOVEFiLM.

There’s a compelling logic to this development: While media companies have been agonizing about the best way to make money from paid digital content, perhaps the best way is to ask those whose whole business is about selling stuff. And while at Forrester we regularly implore our clients to focus on understanding their consumers, that imperative is at the heart of the success of both Tesco and Amazon.

For the consumer, this could be good news, if it helps bring choice to the UK VoD market, especially on the proposed YouView platform, on which both LOVEFiLM and Blinkbox will be offered. For content owners, this opportunity to reach more consumers will be tempered by the knowledge that Tesco’s buyers are famously hard-nosed. For operators and broadcasters, this is an opportunity missed, and gives momentum to an unwelcome new competitor in the UK VoD market.

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Spotify No Longer Too Unlimited*

Spotify’s CEO Daniel Ek today announced via his company’s blog that free access to Spotify is being cut back, with total free listening limited to 10 hours a month and any song being limited to just 5 plays a month. The comments on the blog post are interestingly polarized between those who claim they’ll start pirating again and those who are vociferously in favour of the move.

For Spotify, this is a sound business move. It will buy the firm breathing space and will tilt its operating margins closer to sustainability. It will even make it easier to position a scaled-back US offering as not being a Spotify-lite in comparison to Europe.

But as much as it makes strong business sense for Spotify, it is a shame that the legal music market has lost its second most popular unlimited free on-demand service (after YouTube). As things currently stand, the economics of free simply do not add up: The amount of money that streaming music services can generate from advertising falls short of what they need to pay rights holders. Until that changes, we won’t see mass-market free on-demand music services here for the duration. And this is nothing new; I made the same comments years ago about those ad-supported free music trailblazers Spiral Frog and Qtrax (view my MusicIndustryBlog post here).

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What The Arrival Of Contract-Free £20 ($32) Smartphones Mean

T-Mobile UK has put on sale an Android smartphone for just £19.99 ($32) on pre-pay, with no contract commitment whatsoever. This price for the Pulse Mini includes 20% UK sales tax (VAT) as well as six months of free mobile Internet access, but excludes a compulsory £10 airtime top-up.

This pricing places smartphones into the mainstream. And, as consumers no longer have to pay a premium for the phone over a basic phone or a featurephone and nor do they have to choose to pay extra for a data tariff, many consumers will buy the Pulse Mini without even realising it is a smartphone.

Other smartphones remain a little more expensive for now. A number of smartphone models from Samsung, LG, HTC, SonyEricsson, and RIM are on sale in the £80-£150 range on pre-pay in the UK. Over the next few years, these prices will reduce and will place big-name-brand smartphones into the mainstream phone market pricing, too.

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