Tesco buys music streaming service We7

Tesco has purchased interactive Internet radio service We7 in a £10.8 million deal, the company has announced. The retailer has bought 91 per cent of We7 thus far and will take over the remaining shares in the coming weeks.

We7's 11 million song-strong catalogue is available through iOS and Android apps, as well as on the Web. Like Spotify and other streaming services, the service is free to use but offers a premium ad-free subscription option. The company, which was founded in 2007, boasts three million users and has reportedly increased its revenue in recent years, though it has yet to turn a profit.

The acquisition fits neatly into Tesco's strategy of expanding into the arena of digital entertainment.

After purchasing online movie rentals service Blinkbox in April 2011, the company began offering customers permanent streaming versions of DVDs they bought in-store. "We can link physical purchase of a product to the building of digital collections in a new and seamless way," said Tesco UK CEO Richard Brasher at the time of the deal.

Since the supermarket is one of the UK's largest retailer of CDs, it would make sense to integrate its physical music sales with a digital option the way it did with films. And given the growth of the smartphone and tablet markets, it's likely Tesco is hoping to grow its mobile offerings as well.

"Customers and technology together are transforming the way we listen to music," said Tesco's digital director Mark George in a statement. "Tesco is already one of the UK's largest retailers of CDs; this move will help us offer a greater choice for the growing number of customers who want to access music instantly on any device, whenever and wherever they want."

We7 was co-founded by Peter Gabriel, who can reportedly expect to earn £2 million from the deal.