Digital Top Stories

Tesco takes 91% stake in We7

By | Published on Friday 15 June 2012


Tesco yesterday announced that it had bought a 91% stake in UK-based digital music service We7 for a neat £10.8 million. The acquisition kicks off yet another new era for the personalised radio platform, which has been through various incarnations over the years, most recently opting for a Pandora-style offer. It also comes after the departure of a number of key execs at the digital firm in recent months.

For Tesco, the deal is the latest move by the retail giant to expand its online operations, and follows last year’s purchase of movie streaming service Blinkbox. The retailer reportedly plans to invest in the region of £150 million into its online services over the next two years, and seems to have ambitions to become a one-stop shop for digital entertainment, offering both download and streaming options, possibly linked to physical product or voucher card sales in-store.

We7 was originally founded in 2006 by John Taysom, with current CEO Steve Purdham and musician Peter Gabriel becoming founder investors in early 2007. At launch the core We7 offer was a slightly bizarre ad-funded download service, where tracks came with adverts stuck on at the start, with the option to download an ad-free version after a certain number of listens.

When that somewhat predictably failed to take off, We7 moved into on-demand streaming, putting it in competition with newer rival Spotify. Though We7 remained more committed to the ad-funded model, forming partnerships with various brands who – because the We7 service played through the browser – could embed playlists into their own websites. That said, a premium ad-free option, with mobile functionality, was subsequently added, Spotify-style.

Then, last year, We7 scaled back its free on-demand offer, focusing exclusively, for free users, on its Pandora-style personalised radio service. This element had always been much stronger on We7 than on Spotify (though Spotify did then relaunch its personalised radio function), and bosses at the UK-owned digital firm insisted that stats showed the less interactive version of their service had always been the most popular. Though it is also true that personalised radio is a lot cheaper to run than a truly on-demand digital jukebox, not least because the sound recording rights can be licensed through collecting society PPL rather than having to pay the labels directly, which is always more expensive.

Announcing the acquisition yesterday, Tesco’s Digital Director Mark George told CMU: “Customers and technology together are transforming the way we listen to music. Tesco is already one of the UK’s largest retailers of CDs; this move will help us offer a greater choice for the growing number of customers who want to access music instantly on any device, whenever and wherever they want. We7 has a great team and a good technology platform from which we can launch a range of digital music services in the future”.

Purdham, meanwhile, added: “We are very excited by the prospect of teaming up with Tesco. With its loyal customer base, numerous marketing channels and international reach, we believe Tesco is the perfect partner to bring We7’s music services to a wider audience. Tesco has been an innovator in entertainment retailing for many years and we look forward to continuing this innovation digitally”.

It’s not entirely clear as yet what Tesco plans to do with We7. Blinkbox currently remains a standalone company, but Tesco Clubcard holders are given free access to streaming versions of films they buy on DVD and Blu-ray in Tesco stores. A similar facility could be offered on music products via We7, though that would mean a further shift in the streaming service’s business model, and may not be so attractive to casual music consumers, not least because it’s so much easier to transfer content from CD to digital device (even if technically speaking that’s not allowed).