How supermarkets are becoming entertainment platforms

Over the past year or so supermarket giants such as Sainsbury’s and Tesco have started venturing into entertainment content. A good example is supermarket giant Tesco which acquired We7 (digital music) and Blinkbox (video on demand) last year. Its UK competitor Sainsbury bought online entertainment platform Global Media Vault and Anobii (eBooks) around the same time.

I wondered about the business rationale and aspirations that underpin these deals. Do supermarkets want to bolster their physical presence with an equally comprehensive digital offering? Are Tesco and Sainsbury’s looking to take on global content providers such as Amazon, iTunes and Netflix? What’s in it for these supermarkets?

For the purpose of this blog post I’ll focus primarily on video streaming, outlining the key characteristics of this offering and user demands. Let’s start by looking into some of the relevant factors with regard to building a digital video platform:

  1. What does the user want? – From my market research and conversations with consumers, I believe that users are primarily interested in quality content which is easy to access, engaging and – ideally – free. They want to watch TV shows or films across a wide range of devices, with the the experience being as ‘seamless’ as possible. “It just needs to work” is a sentiment that I’ve heard echoed by numerous people, meaning that they don’t have much time for technical glitches, issues when watching content offline or on multiple devices. The average video on-demand customer wants to be in full control of what they watch, when and where. Also the breadth of the catalogue is just as critical a factor; the sooner a service can offer the latest, popular TV shows or movies the better. An interesting development in this respect is Netflix creating its own “House of Cards” series and offering this exclusively to its subscribers. 
  2. What does the business want? (1) – Revenue. User data. Cross-selling. Forgive me for the crude breakdown of these high-level objectives, no doubt the detail behind their business models is probably more refined than that. I’ve tried to break this down a bit more in Fig. 1 below. For a platform like Tesco’s Clubcard TV (powered by Blinkbox) the main revenue source is likely to be advertising. However, just as important is the value the supermarket colossus derives from offering their users an additional, free service and the ability to learn more about their entertainment preferences. Understanding those preferences better will no doubt help in recommending users other content or entertainment related products. I’ve outlined some relevant metrics to determine the customer value in Fig. 2 and 3 below.
  3. What does the business want? (2) – Engaged customers, brand advocates. Perhaps less easy to quantify but not an insignificant factor in this context. It’s much easier to go to another supermarket if they offer the same packet of crisps at a cheaper price. However, if a supermarket offers their loyal customers great free content, you might think twice before switching your ‘allegiance’. There’s still some debate about how successful Netflix’ House of Cards series has been so far in terms of views and subscription increases, but there’s no denying that the programme got people talking and engaged.

Main learning point: previously I had looked at the business models for video on demand providers such as Lovefilm and Netflix. Their subscription based models were relatively easy to work out. With a supermarket chain like Tesco offering free content to its loyal customers, the proposition gets very interesting. It seems like a very effective way to engage with customers, offering them free but compelling content. Similar to the paid versions of on-demand video, I believe that a free content offering will have a bigger chance of success if it provides great content and if it’s easy to access across a range of devices.

Fig. 1 – Breakdown of key players in the video streaming space and their business models

A. Subscription model / Pay-as-you-go

Key players: Netflix, Amazon (Lovefilm/Amazon Instant Video), Apple, Blinkbox and Walmart (Vudu – US)

Key value proposition: Offering quality content and a great – cross-platform – user experience

Business model: Either a monthly subscription fee or pay-as-you-go rental

B. Advertising

Key players: YouTube. BBC iPlayer, Channel 4 VOD, Hulu (US), Tesco Clubcard TV, WatchFreeMovies and Zmovie

Key value proposition: Offering quality content for free and a seamless – cross-platform – user experience

Business model: Free access, no fees required. Use free-access model to attract users to other (premium) content services. Advertising as a main revenue source.

Fig. 2 – Four ways visitors of media sites can generate value (adapted from “Lean Analytics” by Alistair Croll and Ben Yoskovitz, p. 121)

  • Subscriptions – Measure subscription rate to monitor subscription revenue
  • On-site engagement – You can look at a number of engagement metrics (e.g. time since last visit, time per visit, visits per day, pages per visit and time on page)
  • Ad-revenue – Generate revenue through display ads (number of impressions x cost per impression = Cost Per Engagement), affiliate links (affiliate % x sales volume = Affiliate Revenue), sponsorship (e.g. monthly sponsorship rates and number of sponsored banners) and Pay Per Click (Click-through rate x Ad price = Pay Per Click revenue)
  • Sharing –  Generate value through sharing content (e.g. through on-site tools and off-site)

Fig. 3 – Key metrics that media sites are likely to care about (adapted from “Lean Analytics” by Alistair Croll and Ben Yoskovitz, p. 117)

  • Audience and churn  Understanding how many (paid) users you’re adding and losing. For services like Netflix and Blinkbox ‘user loyalty’ is a critical aspect
  • Ad rates or Cost per engagement –  How much money can a service make from impressions based on the content it covers and the people who use the service
  • Ad inventory – The number of impressions that can be monetized
  • Click-through rates – How many of the impressions actually turn into money
  • Content/advertising balance – The balance of ad inventory rates and content that maximizes overall performance

clubcard_tv_contentfullwidth

Related links for further learning:

  1. http://www.walmart.com/cp/vudu/1066144
  2. http://www.walmart.com/cp/Video-On-Demand-by-VUDU/1084447
  3. http://www.vudu.com/
  4. http://crave.cnet.co.uk/homecinema/tescos-free-clubcard-tv-service-has-some-right-old-tosh-50010826/
  5. http://blog.laptopmag.com/walmart-launches-vudu-video-on-demand-service
  6. http://money.cnn.com/2011/07/26/news/companies/walmart_vudu_online_movie_service/index.htm
  7. http://techcrunch.com/2013/01/07/walmart-vudu-disc-to-digital/
  8. http://techcrunch.com/2011/07/26/walmart-vudu-movie-streaming/
  9. http://www.fool.com/investing/general/2013/05/15/can-netflix-out-stream-the-competition.aspx
  10. http://appadvice.com/appnn/2013/05/when-it-comes-to-streaming-video-netflix-and-youtube-continue-to-lead
  11. http://www.allmyfaves.com/blog/movies/watch-movies-online-top-10-film-streaming-review-sites/
  12. http://voyager8.blogspot.co.uk/2010/02/what-are-cpm-cpc-cpa-cpe-etc-in-online.html
  13. http://thenextweb.com/uk/2013/04/03/tesco-brings-bbc-worldwide-content-to-its-blinkbox-powered-video-streaming-service-clubcard-tv/
  14. http://www.bbc.co.uk/programmes/p01b1hyh
  15. http://www.pocket-lint.com/news/121318-tesco-clubcard-tv-adds-itv-dramas-and-cooking-shows-to-free-streaming-service

Barnes & Noble doesn’t only do books and tablets, it also does recommendations

I’m always intrigued to find out how digital businesses tackle the issue of user engagement through tailored recommendations. Content providers like Netflix and Amazon notoriously spend a lot of money and effort into their recommendation engines and it was interesting to find about how Barnes & Noble (‘B&N’) are now handling recommendations through their latest “NOOK” device.

Personalised recommendations are a though one to get right. I guess most of us have experiences with using Amazon to buy Christmas gifts and subsequently receiving recommendations on floral craft books during the rest of the year. With the NOOK, B&N introduces ‘Channels’ to try and address this issue:

  1. Based on personal interest – The idea behind creating specific ‘channels’ is to base each channel on a specific theme that’s likely to interest a group of customers. The titles of Nook’s existing 300+ channels vary from “Janes Austen & Heirs” to “International Intrigue.”
  2. How is each channel curated?  Each channel contains 40-50 titles, mostly curated by B&N booksellers but also taking into account algorithmic info and user data (e.g. customer profiles and purchasing behaviour). The channels currently only consist of books, but B&N are planning on including other content (like movies and apps) over time.
  3. Keeping it dynamic – Like I alluded to earlier to with regard to Amazon’s classic ‘floral craft’ example, B&N customers can improve the channels and books recommended to them by ‘liking’ or ‘not liking’ suggested titles. As new titles get released, B&N will add these to the relevant channels (or create new channels around them).

Main learning point: the idea of enabling users to discover new content through ‘channels’ is a great one. The ongoing challenge for content providers like Barnes & Noble is to get the content of each channel ‘right’. This means finding the right balance between human curation and automatically generated recommendations. The value of the ‘channel’ concept for users is that they can access a continuous stream of recommendations within a genre or a topic they like. For B&N, the value comes from being able to retain users (and retain their spend) through an ongoing selection of titles.

Related links for further learning:

http://www.businessweek.com/articles/2012-09-26/barnes-and-noble-s-new-nook-tablets-sell-discoverability

http://www.engadget.com/2012/11/22/psa-bn-nook-tablets-uk/

http://reviews.cnet.com/2300-3126_7-10013914-24.html

http://blog.laptopmag.com/barnes-noble-unveils-nook-hd-9-inch-tablet-for-269-updates-7-inch-slate

Understanding more about Amazon Cloud Player and storing music in the cloud

Last week saw the UK launch of Amazon’s Cloud Player, a service enabling Amazon users to play their music stored in the cloud (through Amazon’s Cloud Drive) from any computer or Android device connected to the Internet. The service was launched in the US back in July, and now Amazon’s UK customers will be able to experience the same service. These are the main propositions that the Cloud Player is promising to offer:

  1. Your Music. Everywhere. – Seamless access to one’s music is rapidly becoming a ‘given’ when it comes to offering music services. Irrespective of the device one is using – smartphone, tablet, PC or ebook reader – users expect to be able to access music wherever, whenever. No surprise then that this is the main underlying promise of the Cloud Player: your music is available on a range of devices (e.g. Android, iPod, iPhone, Sonos, etc.) and the experience will be consistent across all of these devices and platforms.
  2. Import your music collection – Like iTunes Match and Google Play, Amazon’s Cloud Player will enable users to upload their own music collections, with Amazon matching the music on your PC to their 20m track catalogue. This means that music purchased from Amazon or iTunes or from ripped CDs will be matched against Amazon’s catalogue, upgraded (to a better audio quality where possible) and made available through the Cloud Player.
  3. Secure and easy to use – Amazon promises that for all the MP3 songs and albums users purchase or have purchased in the past will be automatically saved to Cloud Player, which means you’ll have a secure backup copy of the music you buy at Amazon. The ‘secure’ and ‘instant’ aspect are key to any service of this kind. I haven’t used the Cloud Player yet but this would be main challenges to any product or service which promises a great user experience. Is is easy to use? Does is ‘just work’?

I haven’t yet tried the Cloud Player, but reading user and expert reviews gives an interesting insight into this new service. The main thing that struck me is that users are restricted from buying songs through the Cloud Player app on Apple devices (think iPhone, iPad and Mac). This means that one can use the Cloud Player for listening and streaming on an Apple device but not for buying music. I know I’m biased (since I work for 7digital, a competitor of iTunes and Amazon Music) but this defeats the purpose of using a service that promises to work ‘everywhere’.

Main learning point: I guess the main caveat to this blog post is that, as I say, I work for a (smaller) competitor of Amazon in 7digital. At 7digital, we always try to concentrate on a consistent user experience that ‘just works’ irrespective of the device or operating system one uses. Services like Amazon Cloud Player are good solutions for anyone who wishes to ‘consolidate’ his/her music collection. I guess the main downside of using the likes of Amazon and iTunes is that they are pretty ‘vertical’ which means that their products only work totally seamlessly and as intended on their own devices and operating systems, which has bearing on the overall user experience.

Related links for further learning:

http://www.telegraph.co.uk/technology/amazon/9550721/Amazon-announces-cloud-player-in-the-UK.html

http://www.techradar.com/news/internet/amazon-cloud-player-heads-to-the-uk-1098144

http://lifehacker.com/5930593/amazon-cloud-player-adds-scan-and-match-to-save-you-time-when-uploading-your-music?tag=streaming-music

http://www.forbes.com/sites/ewanspence/2012/09/19/amazons-cloud-player-arriving-in-the-uk-is-a-vital-step-for-kindles-success/

http://allthingsd.com/20120903/demystifying-amazons-cloud-player/

http://cloud-music-player-review.toptenreviews.com/amazon-cloud-player-review.html

http://download.cnet.com/8301-2007_4-20048416-12.html

http://lockergnome.net/questions/129952/will-you-use-amazon-cloud-player

Amazon is really getting into interactive TV

Back in January, Amazon acquired Lovefilm to strengthen its position in the online video market. It has now bought Pushbutton a London-based digital agency specialised in interactive television content and services for new platforms such as Internet Protocol Television (IPTV), internet-enabled TV sets and tablets. Pushbutton counts the linkes of Sky, BBC, Virgin and Microsoft among its clients as well as Lovefilm, for which it has developed applications on Sony’s “Bravia” Internet-enabled TV range as well for the Playstation 3.

What does this acquisition tell us?

  1. It’s all about content – Like the acquisition of Lovefilm, Amazon’s focus is very much on finding lucrative content related opportunities. The increase in number of app-enabled TVs is such an opportunity.
  2. Bring on Netflix! With US online content behemoth Netflix looking to expand into Europe in 2012, Amazon (and Lovefilm) will need all the content firepower that they can get.
  3. The Amazon tablet? With Amazon rumoured to launch its own tablet computer later this year, this acquisition of Pushbutton will help Amazon design and develop user interfaces and experiences geared for tablets.

Main learning point: Amazon is clearly on a path to expand its content catalogue as much and as quickly as possibly. Acquisitions such as those of Lovefilm and Pushbutton do make a lot of sense in that context. Not only is Amazon extending its catalogue of online content, through Pushbutton it now also has the expertise available in-house to design and develop interactive experiences around that content.

Related links for further learning:

http://thenextweb.com/uk/2011/07/28/amazon-acquires-london-based-tv-app-company-pushbutton/

http://paidcontent.co.uk/article/419-amazon-buys-lovefilms-iptv-app-designer-pushbutton/

http://www.geekwire.com/2011/amazon-buys-pushbutton-adds-universal-movies

UX features for online retailers to consider

I just read a really insightful piece by Paul Bryan on 10 Absentee UX Features on Top e-Commerce Sites. His agency, Usography, has conducted a Retailer UX audit, looking at the 100 top retail websites. The audit highlighted some key user experience (UX) features for brands to consider. From the 10 features that Bryan listed in his article, I particularly liked following UX features and looked for interesting examples to serve as good illustrations:

  1. Product videos – A case can be made for video as a good way of bringing a product to life, think clothes, shoes or cars. Good examples are Zappos and Mercedes Benz
  2. Combination of online and offline – Personally I’m all for the convenience of online shopping (and not having to go to a store). However, buy online-pick up in-store functionality offered by the likes of Tesco is rapidly gaining popularity
  3. Price drop alertsAmazon is a good example of a site that lets customers know when the price of a product they’ve indicated an interest in has dropped. It’s an incentive for customers to return the site and to buy the product.
  4. Customer product tagging – I think Bryan has a point when he states Letting customers create their own tags for products keeps the taxonomy fresh and relevant. However, call me a cynic, but I’m still not convinced most consumers would go through the effort of for example tagging a pair of red socks at Urban Outfitters.
  5. Co-shopping – This is a feature that lets customers in different locations view the same product and have a chat about it in a sidebar. Good examples are shopwithyourfriends.com and Dell.
  6. Virtual try-on – When talking about engaging customers, enabling them to virtually try on a product is a compelling feature. There are good examples in sites that let users try on glasses or see what they look like in clothes of their choosing.

Main learning point: even though eCommerce has been around for a while now there is a good number of exciting new UX features for retailers to implement. The research conducted by Usography shows that particularly social media oriented features such as customer tagging and co-shopping are on the rise and could help eCommerce sites to engage effectively with their target audience.

Related links for further learning:

http://www.internetretailing.net/2011/06/tesco-to-expand-click-and-collect-to-groceries/

http://www.magentocommerce.com/knowledge-base/entry/how-do-product-tags-work/

http://www.usography.com/audit/ http://www.zugara.com/augmented-reality/e-commerce