Tuesday, January 27, 2015

Wise Investment: Kieron Smith or Blinkbox ?

So would you invest in a service that still has to prove itself or someone who has done it more than once and brings ability to the table?
The troubled UK supermarket Tesco was forced recently to refocused on its core business and as a result dropped its potential universal media service offer Blinkbox. The film/video service was acquired by TalkTalk for a reported £5million and Australian company Guvera entered talks to buy the music service. This left the ebook business Mobcast, which it bought for £4.5m from author Andy McNab and business partner Tony Lynch in September 2012. The Blinkbox ebook service only went live last March.
So would you buy Blinkbox ebooks or look at alternative ways to invest less for more?
Waterstones went for the acquisition to buy the ebook business from Tesco, but they failed to agree and parted. We now have reports that Kobo are after their customer list which is a good option provided they are active, the sales generated are worth the investment, the data itself is in good order and of course the price is right. However, customer lists are not exactly million dollar purchases and list brokers could probably offer a cheaper and equally attractive demographic.  
So the clock continues to tick and the question must be whether Tesco will let it go in a fire sale and write off the debt or will continue to strive to find a home for either the debt or the service?
It hard to see how BlinkBox ebooks making the return Tesco sought and decoupling the three media streams dilutes further any value it had. Some would question how they had grown to 60 core staff, what on earth they were all doing, the price they paid in 2012 and the level of effort and cost they threw at it to rebranded it, repackaged it and re-staffed it. Some would suggest a classic case of buying a pup and certainly something that they could have achieved quicker and for less money.
The markets often don’t follow logic and when someone wants to participate they often lunge for a quick fix and buy what they perceive is a good buy. Due diligence is often hard when its about perception, interpretation and gut feel and none of the major UK supermarkets have been able to bring to market an effective digital media service and with their current refocusing its hard to see them trying too hard moving forward. Waterstones is likewise refocusing and continue to show little appetite, or ability, to take on digital. Some would suggest that buying Blinkbox was never going to fit Waterstones whatever the deal.
So today we hear Kieron Smith is joining Blackwells. Now that’s a smart move by Blackwells and considerably cheaper and wiser than buying a service that you would only spend a fortune on, to take apart, to fight a battle you aren’t going to win.
Blackwells has always had a good history of digital investment and although they have had their own challenges and very difficult markets they continue to press forward. By acquiring the man and not the service, they bring in someone with very strong digital credentials who has done it before in the trade and someone who has proven his ability to adapt and could well add another dimension to their existing market segments.

As pointed out on Dragon’s Den it is often the person that investors should focus on and the service or product may be a bonus.

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