Woolworths Collapse Could Affect Real Networks; Companies Are Talking

Real Networks is talking with Woolworths’ wholesale subsidiary Entertainment UK (EUK) to figure out what the retailer’s possible demise could mean for it. EUK, which distributes CDs, DVDs and other media for Woolies, in March also became a customer for Digital Vault, a new white-label digital music network created by Real. Paying Real monthly for the service, which transfers content from a Frankfurt data centre, EUK used the vault to power download stores for Express Newspapers, Zavvi.co.uk and WoolworthsDownload.co.uk, which launched in May.

But Woolworths’ administrator Deloitte on Friday said 700 EUK were being laid off, leaving 375, after failing to find a buyer, and further cuts look possible. Real Networks’ EMEA VP for technology products and solutions Robert Riccitelli told paidContent:UK: “We’re still talking to EUK digital to see if there’s any life after Woolworths.” EUK is still so far Real’s sole customer for Digital Vault, which took two years to build in close cooperation with EUK at “several million” pounds according to previous reports. Riccitelli said the company is “in the process of some other sales activities” for the service, which he said was in its early stages, and is “still very committed” to offering digital media services on a B2B basis.

Fall-out from EUK’s strife could be more widespread than Woolies alone. Zavvi has suspended e-commerce orders due to supply problems and says its downloads store is merely “coming soon“; administrators are waiting in the wings in case Zavvi itself collapses, Times Online reports.

What could happen now, as Deloitte tries to “realise value from the assets of the business”? A full closure of EUK would certainly hit entertainment retailers seriously and would probably mean the closure of WoolworthsDownload.co.uk. Though the loss to Real’s business would be small, it would leave Real needing either to pitch Digital Vault harder or reconsider it, and would leave any other white-label clients like Zavvi seeking new digital distributors. That could mean an opening for providers like OD2 and 7digital. But Deloitte could find any value left in EUK is precisely in this growing digital area, which has no physical overheads or shelf-stacking, and choose to continue operating online only.

Can Woolworths recast EUK as a digital media company or is it already too late? Riccitelli: “We’re still in ongoing discussions with them. I think they have a strong team and we were certainly pleased to have our relationship with them.” For Real’s part: “We’re confident we can weather this economic storm and come through the situation stronger.”