Sainsbury’s has moved further into the digital entertainment market by buying HMV’s stake in social e-book site Anobii for £1.
Anobii is an online e-books platform where readers can research, discuss, rate and buy e-books to read on a range of devices, from e-readers to smartphones and tablets. The site has more than 600,000 users around the world and stocks more than 60,000 e-books. Investors in the business also include Harper Collins, Penguin and Random House Group.
Sainsbury’s expects to own a majority 64% share in Anobii as a result both of this deal and of its investment in the business’ future, which will include developing the business both in the UK and overseas.
Mark Bennett, Sainsbury's head of digital entertainment, said: "Anobii's innovative use of social media is a clear differentiator. This acquisition is a valuable addition to our digital portfolio and shows our commitment to becoming a key player in the digital entertainment market.
“It further demonstrates how we are constantly looking to innovate and seize opportunities that will support the future growth of our business. We're excited about working together with the Anobii team and our fellow shareholders in supporting Anobii to become a leading retailer of e-books."
Sainsbury’s launched its Sainsbury’s Entertainment division in November 2010, bought lossmaking online entertainment company Global Media Vault for £1m in October 2011 and launched its music download service earlier this year.
Our view: This deal is as interesting for what it says about HMV’s plans for the future as for what it says about Sainsbury’s. We’ve already seen supermarkets make extensive inroads into the traditional high street markets of music stores and bookshops. As Sainsbury’s looks to do the same in the digital market, are they getting a helping hand from HMV? It's worth noting that when Sainsbury's bought lossmaking Global Media Vault in 2011 it spent £1m to do so – this £1 purchase seems a small outlay in comparison (although it's unclear what other costs are involved in the acquisition).
From HMV’s standpoint, the supposition must be that it sees this holding as not core to its business. In its May pre-close update, HMV put the emphasis on music and film as its route back to profitability. At that time it posted total group sales down by 18.3% in the year to April 28, but said it believed the “disruption” of Game Group’s administration would be its route back to profitability.
One of the reasons for Game’s failure was that it didn’t move fast enough into the digital entertainment market. While today’s announcement will probably not be a big milestone in HMV’s history, it does raise questions as to whether the entertainment retailer is at real risk of repeating Game’s mistakes. Winning a larger share of a declining bricks and mortar market is not the obvious route to sustainable success.