Tesco’s reported plans to sell off its BlinkBox video streaming service see its most prominent effort to break into digital end in failure. Here StrategyEye Digital Media's Rory Grieve looks at why BlinkBox is a textbook case of corporate hubris and how by the time Tesco figured this out, it was too late.
Rory Grieve is a reporter for StrategyEye Digital Media, a unique executive intelligence platform that helps its users monitor and interpret all corporate activity from across the technology markets.
The platform is used by senior executives at almost all major media, telecoms, tech and advisory firms globally to help them monitor and interpret the technology industry by tracking deals and investments impacting a universe of more than 30,000 companies and 200 industry categories, from cloud services to social media and ecommerce.
Tesco’s reported plans to sell off its BlinkBox video streaming service see its most prominent effort to break into digital end in failure. The move is partly prompted by Tesco’s numerous problems with management eager to refocus the company on its core business, but also tells us a lot about the crowded video streaming space.
Here I look at why BlinkBox is a textbook case of corporate hubris and how by the time Tesco figured this out, it was too late.
Back in 2011, when Tesco bought Blinkbox the store’s main concern was Amazon. The Seattle giant sold a variety of digital media and was eager to compete with supermarkets to sell groceries (it still is – it’s just taking a while). For Tesco the appeal of BlinkBox was simple: it would be able to leverage its dominant position as the UK’s largest retailer to secure a strong foothold in digital media and ward off Amazon.
In this, it failed utterly for a number of reasons. Its first problem was it failed to distinguish itself from the many other services it out there. BlinkBox’s only offering to sell movies and TV shows putting itself in direct competition with iTunes. Tesco backed up the service with an impressive advertising campaign, linking the service with its Clubcard loyalty scheme and promoting BlinkBox in its supermarket.
All of which was nice, but users were already used to using iTunes to buy digital media. Tesco underestimated how entrenched users were in iTunes. Everyone who had an iPod or iPhone had an iTunes account. Compared to this the ability to redeem Clubcard points for a movie is hardly a compelling reason to switch services. BlinkBox didn’t even let users buy music.
More than music, what doomed BlinkBox was that it pursued the wrong model for online video. This was the age of the subscription model – something Tesco shouldn’t have missed, but did. All it had to was see how Netflix had pioneered this model in the US or look at Amazon, which had bought subscription service LoveFilm a few months earlier. Changing tack would have been hard, but worth it. Instead Tesco splashed out the money on a handful of expensive releases.
This was never going to be enough to win over new users. As for those looking to buy something to watch on TV then the various pay TV providers, including Sky, Virgin and BT, integrated this into their service. For BlinkBox it’s too late. Even if it changed now it wouldn’t be able to offer original content as Amazon or Netflix does.
To its credit, Tesco’s BlinkBox Music was a much better attempt at trying to crack digital media. For a start, it’s a subscription service and is trying to targeting a different audience from Spotify. BlinkBox Music is aimed at the ‘passives masses’ – the majority of people who just want a simple service which works. This is smart targeting as digital music services in many ways are still the domain of the early adopters with mainstream acceptance yet to come. The service isn’t popular yet but it’s only a year old. Only it may never get the chance to now.
It might still fail with YouTube looking to launch its own music service and Apple buying Beats. But in all it’s a much better attempt at making a digital service than its TV and movie service.
The tale of BlinkBox failure should be familiar to everyone. A huge company buys an interesting digital company hoping its sheer size will make this company a success. The company pours money into the service without understanding how the market is changing and with no attempt to differentiate its service. By the time it realises its mistake it’s too late and the service is sold or shut down. In this way Tesco’s foray into digital media with BlinkBox is a classic case of corporate hubris. The real shame is Tesco did learn from its mistakes and its music service was a much improved effort, which now may never get that chance to blossom.
Click here to visit StrategyEye Digital Media to find out more about the platform and sign up for a free trial so you can keep up to date with the hottest digital investments, benefit from daily intelligence briefs, access a range of customised deal data tools and get invited to an exciting programme of executive networking events.
