Online retailer Play.com has been acquired for just £25m by Japanese ecommerce operator, Rakuten. Founded in 1998, Play.com is the second biggest online retailer in the UK market and sells a wide range of goods, most notably DVDs, CDs and electronics.
Many commentators believe that the relatively low sale price relates to an upcoming tax loophole clampdown that may put an end to Channel Islands-based websites being able to see items at VAT-free prices. Based in Jersey, Play.com can currently sell goods for less than £18 to mainland UK without incurring any sales tax – all because of EU rules drafted nearly 30 years ago.
The UK Treasury has estimated that it loses approximately £130m per year because of this, whilst independent music store campaigners believe that the discrepancy has made for an uneven playing field which has resulted in many closures for those unable to compete with web prices. One would assume that this has also had an adverse effect on struggling competitor, HMV.
In his March budget, George Osborne stated his intention to put an end to the loophole, and after the VAT-free threshold is reduced to £15 this November, the practice will cease entirely by March 2012. This pending change in law would surely have had an impact on the value of Play.com, and it looks as though the final figure reflected that.
Meanwhile, the UK DVD market has also suffered from a 6% dip in sales, downloading and streaming increased by 18%. The increasing prominence and uptake of Blu Ray may also be a contributing factor towards this statistic.