TESCO: Food for Thought

Of all the things you expect Tesco to talk about, cloud gaming, the digital future and saving physical product is not amongst them.

Those are the topics you imagine GAME to harp on about at its next strategy update. Not the head of entertainment at a retailer that’s primary business is in fruit and veg.

But that’s exactly what Tesco’s entertainment boss Rob Salter wants to discuss with MCV today. And that’s because he has spent the last year doing his utmost to protect what’s left of the ailing music market, whilst backing cloud movie streaming service, Ultraviolet.

The idea, he says, of selling licences and not discs, is something that doesn’t just apply to CDs, but to the whole gamut of entertainment – games and movies included.

The threat is more immediate in music,” he tells MCV. And gaming has been in growth and it hasn’t had the same inherent problems that the other markets have had.

But at some point, I think it will.”

ULTRA WHAT?

One new development Salter’s keen to talk about is Ultraviolet, a new ‘standard’ in streaming movies.
Most major movie studios have already signed up to it.

The idea is that hardware manufacturers of PCs, mobiles, TVs and so on will incorporate Ultraviolet tech into their devices.

That way retailers can sell a DVD that comes bundled with an Ultraviolet licence, allowing consumers to buy the disc and also stream it to the hardware device of their choice.

What do people do today when they buy a disc? They buy it, consume it and then share it with their family,” says Salter.

Ultraviolet addresses how we recreate that flexibility of experience when there is no actual disc. The idea is that consumers can register a defined number of users, and then they can register up to 12 devices they want to stream that experience to – be it an Xbox or mobile phone.”

Salter says bundling licence with physical product should be applied to music, too.

When you buy a music CD you’re not supposed to rip it, you’re actually breaking copyright by doing that. But the masses are doing that. So we can either ignore it and pretend it doesn’t happen, or acknowledge it and make it part of the proposition.

Publishers are very cautious. And even the notion that they have lost the opportunity to sell you something twice is a tough one. But that isn’t the problem at the moment. The problem is selling the product in the first place.

I have suggested that in music we come up with a package where what we are actually selling is a licence – a bundle of rights – and the disc we are putting it with is an incidental free gift. And I think that might prolong the life of the CD.”

SAVING MUSIC

Salter has been active in his attempts to rescue packaged music. He says that in ten years he has seen the space dedicated to CDs more than halve within the supermarket, and he has been working tirelessly to stop that declining any further.

The entertainment team even launched exclusive albums – such as Girls Aloud singer Nadine Coyle’s debut record – in a bid to drive customers to its CD department.

But the big thing record companies can do, Salter says, is change how physical albums are distributed.

The economics of physical product is so bad that the only way to solve it is if none of us gets paid – the retailer, the guy who made the music and everyone in between – until will sell it,” he says.

Because that way the cost of the product is pennies and we can buy a lot more, I can worry less about shrink, I can make sure product is always on the shelves, and if we lose a few for whatever reason, they only cost pennies to replace.

We currently go through this terrible dance where we buy product with some returns rights, and then at the end of it we have a big fight and eventually they will take it back. They will spend money taking it back, refurbish it and then count and crush it. And then down the line they send the artist a reverse royalty statement. Why do any of that? It is a nonsense way of doing it.

I’ve told the music guys that the problem with in-store space is that it is hard to keep it, it is even harder to get it back. Every day we are talking about it and not doing anything, it is getting worse.”

WHAT ABOUT GAMES?

But what does this have to do with the games industry? Salter thinks there are lessons to be learnt from movies and music.

He has a few suggestions already. He believes consumers who own multiple platforms shouldn’t have to buy a game more than once. For example, when gamers buy FIFA on Xbox 360, they should be able to access that game on PS3, too.

It may sound fanciful, but only this week Portal 2 on PS3 comes bundled with a code to access the PC version.

We have had a few conversations with the third party games publishers about bundling rights for more than one platform,” he says. And the answer is in principle ‘yes’. But we need evidence. We’d need to research how many people have more than one platform. Maybe everyone has only got one platform. I am not saying we have all the answers. But it might be worth looking at things differently in terms of how people purchase content.”