Amazon agrees to buy Lovefilm for $317M

The subscription-based DVD rental service is the Euro Netflix

Lovefilm—hailed as the Netflix of Europe—announced Thursday that it has agreed to be acquired by Amazon.  The terms of the deal were not disclosed, but the Financial Times reported that Amazon bought up the remaining shares of Lovefilm for £200 million, or approximately $317 million.  Amazon has held a 42% stake in Lovefilm since Lovefilm acquired Amazon’s DVD rental business back in 2008.  The deal still has to go through European regulatory approvals, but is expected to close in the first quarter of 2011.

With more than 70,000 titles, Lovefilm’s DVD rental subscription service reaches some 1.6 million subscribers throughout the UK, Norway, Sweden, Denmark, and Germany.  And like Netflix, Lovefilm is pushing towards more online streaming, allowing customers with its premium service to get unlimited streamed movies at no extra charge.  The site was ranked number one by Hitwise in 2009 in the Movies/Entertainment category based on market share and unique visits throughout the UK.  It also came in at number five in the Deloitte Fast 50 UK 2009 and was awarded 22^nd place in the Deloitte Fast 500 EMEA fastest growing public and private technology companies.

Lovefilm reported revenues of £97.2 million in 2009, representing a 29% increase from 2008 when the company reported £73.1 million.  Even more startling is how much the company cut its pre-tax losses.  In 2009, Lovefilm reported a pre-tax loss of £934,000, while its 2008 pre-tax loss was £7.4 million. 

One Lovefilm investor, Dharmash Mistry, Partner at Balderton, told PaidContent.org that: “It’s a win-win all around.  This is a game for relatively deep pockets—you need to do deals with studios, which is an expensive business.”  Mistry explained: “Today, the majority of Lovefilm rvenue and profits come from the physical business. But we’re in a position on the transition curve to digital. That will involve buying rights, a change in rules of ownership. The winning players will be the brands with the deepest pockets to buy those rights. That won’t happen overnight.”

Image source: Lovefilm.com