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British music service We7 is being acquired by Tesco, which is taking a 91 per cent stake in the company for £10.8m. A full acquisition is expected.

We7 launched five years ago with backing from Peter Gabriel, who has stuck by the company despite heavy losses. Founding CEO Steve Purdham set up the company after selling SurfControl, which made net nanny software CyberPatrol, to Websense for £200m in 2007. We7 lost £3.68m in 2009, with revenue of just £361,000.

The company has offices in London and Oxford.

Originally an ad-supported streaming service – Yahoo! provided the ads – We7 itself morphed into a 'personalised radio' service, with less choice for the listener but much lower royalty costs.

Tesco is shifting into digital entertainment delivery, acquiring Blinkbox and vowing to be the leading retailer for UltraViolet, Hollywood's cloud locker/DVD service.

In the long run We7 probably makes more sense as part of Tesco's delivery chain than as a go-it-alone brand, given its know-how about the (very) messy business of music rights licensing. For now Purdham tells the Reg that various options had been discussed with Tesco for some time, and that "it's business as usual" for the radio service. ®

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