Why Amazon Agrees to Buy film-and-games rental firm LOVEFiLM?
American retail giant Amazon.com (AMZN) acquired European DVD rental-by-mail and online streaming company Lovefilm. LoveFilm is backed by venture capital firms DFJ Esprit, Balderton Capital and Index Ventures, while Amazon had a reported 42 per cent stake in the company before the deal.
British-born and VC-backed Lovefilm was formed in early 2004 when Arts Alliance Media acquired and rebranded DVDs On Tap and later acquired Boxman.se and Digitarian.dk. It later merged with Video Island in 2006.
LOVEFiLM offers a postal rental service, as well as a streaming facility, and operates in the UK, Germany, Sweden, Norway and Denmark. Amazon, which does not operate any similar business in Europe, noted that the two sides have “enjoyed a strong working relationship since LOVEFiLM acquired Amazon Europe’s DVD rental business in 2008, and we look forward to a productive and innovative future.”
Amazon already had a significant minority shareholding and does not offer a rival service in Europe. It is thought that e-tailer wants to bolster its existing e-tail proposition with an already established VOD offering.
“LOVEFiLM and Amazon have enjoyed a strong working relationship since LOVEFiLM acquired Amazon Europe’s DVD rental business in 2008, and we look forward to a productive and innovative future,” said Greg Greeley, Amazon’s VP of European retail.
Simon Calver, chief executive of LOVEFiLM International, said: “The deal is a winner for the members who love LOVEFiLM because of its value, choice, convenience and innovation in home entertainment. With Amazon’s unequivocal support we can significantly enhance our members’ experience across Europe.”
Lovefilm was one of the first companies in Europe to offer a rental-by-post service and, like Amazon, gives customers access to a wider array of titles than a bricks and mortar business could offer. Lovefilm operates in the UK, Germany, Sweden, Norway and Denmark and claims to have 1.5 million subscribers.
The move could help guard against the possibility that US rival Netflix (NFLX), which has more than 16 million subscribers, could invade the British market.