Tesco has upped the ante for the digital distributors this week after announcing that it will revamp it’s current digital downloads service to take on the giants of iTunes and the like.
At first glance it’s easy to assume this is just the inclusion – maybe even just an adaptation of – one more competitor in a large marketplace, however Tesco could find themselves very quickly in a leading position amongst their rivals. It may be the case that Tesco already offer music downloads through their current service, however the model is incomplete, the tracks are locked with DRM, and the only offered format is Windows Media Audio, meaning no compatibility with your iPod and no copying, sharing, backing-up, moving of your purchased music.
Tesco however have announced that their new direction, named ‘Tesco Digital’, will look to offer the same kind of content coverage as iTunes – though no major labels have yet to publicly confirm their inclusion – and over 50% of the music will be DRM-free and thus compatible with your iPod. This 50% is hoped to become 100% within a year, and with the prospect of the major chain’s philosophy to sell-’em-cheap there could also be benefits for the consumer’s wallet, a potentially lucrative offering as the credit crunch beds in. Obviously the reductions will be limited and it would only be Tesco who would feel the pinch of undercutting competition, however Tesco have a number of very promising advantages that could bring about such a tactic. They’re practically omnipresent across the UK and have a widening range of physical products available in their stores that has gone to give them a reputation more toward a real world amazon.com that your bread and milk shop. Alongside this their online shopping is fast becoming a viable, and popular, alternative to a walk down those highly stacked aisles. But what I find most opportunistic for the company is the potential tie-in of these internet based outlets to their relatively recent broadband package. To consider that their early philosophy was always to work on loss-leaders, enticing the customer to walk down their aisle and wed their products, a move into the digital realm with very much the same philosophy could easily generate the same kind of success. A quick look shows that currently 1,000 Clubcard points are on offer when you sign up to their broadband service. Whose to say a monthly allocation of downloads isn’t next, all the while earning points for mums card while filling the kids’ iPods.
Obviously there are aspects which I have eluded to here, one very interesting omission is Tesco’s plans to enter the mobile contract market, which has been reported here, with it providing a viable means to selling their products via mobile phones – undoubtedly this will have implications on selling tunes to modern phone/mp3 player hand sets. I also find it worthy of noting that Wall Mart, up until very recently, were the leading physical, and overall, sellers of music in the States (only overtaken by iTunes in the last month). Should strong synergy across Tesco’s products be put in place it could find itself in a dominating position within the technological front across a whole range of products, not just music.
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