Tesco is to take on Lovefilm and British Sky Broadcasting in the fast-growing internet video market with the acquisition of Blinkbox, a TV and movie-streaming service.
More than 2m people visit Blinkbox every month to access a library of 9,000 movies and TV shows, including Harry Potter, Inception, Spooks and The West Wing. The site offers some video for free, paid for by advertising, with more recent content available on a pay-per-view basis.
Tesco has acquired 80 per cent of the Farringdon-based company from its investors, Eden Ventures and Nordic Venture Partners. Terms were not disclosed.
A similar deal in the US last year saw Walmart, the world’s largest retailer, acquire Vudu, a video site, for a reported $100m (£61m).
The deal follows January’s acquisition of Lovefilm for £200m by Amazon, whose digital side of which competes with BSkyB’s SkyPlayer on-demand TV and movie service.
“Whether customers want to own the DVD, download a digital movie, stream a rental or all three, Tesco is committed to giving customers choice,” Richard Brasher, Tesco’s UK chief executive, said on Wednesday.
“The acquisition of Blinkbox, together with a range of other services currently in development, means we can link physical purchase of a product to the building of digital collections in a new and seamless way. Working with the Blinkbox team and our content partners, we will bring these compelling propositions to life for our customers.”
Blinkbox was created in 2006 by Michael Comish, formerly of Channel 4’s new media unit, and Adrian Letts, who was previously at Vodafone’s content division. Originally providing short clips of movies for people to send to their friends, by 2008 it was adding full-length shows to the site.
Mr Comish, chief executive, said Tesco planned to keep Blinkbox as a separate unit, retaining its brand.
“We thought long and hard about where we want to be long-term in terms of a partner and Tesco lines up perfectly with us,” he told the FT. “We are going to build this into a very big UK media company.”
Tesco will provide Blinkbox with access to a larger customer base than BSkyB and also with relationships with consumer electronics manufacturers, suggesting the service could in future come bundled with internet TV sets or PCs.
“We will have access to a lot more capital,” Mr Comish said. “But the money is less interesting than the assets. Tesco has 17m Clubcard holders – 4m of them last year purchased more than three DVDs. We now have access to people who have a propensity to buy and are migrating from physical to digital. They have massive customer reach.”