Amazon has bought Lovefilm, in a deal that reportedly values the UK-based DVD rental and online video company at £200m.
The move is largely seen as a defensive ploy on Amazon’s part against a planned international expansion by US video-streaming giant Netflix.
The deal saw Amazon buy 58% of the business that it did not already own for an undisclosed sum. The firm already bought a 42% stake in Lovefilm in 2008.
The world’s largest online retailer has been gearing up to bid for a full stake in Lovefilm for some time, and today’s deal is thought to value the business at about £200m.
Greg Greeley, vice-president of European retail, at Amazon said: “Lovefilm has been innovating on behalf of movie rental customers across Europe for many years and with the advent of the Lovefilm player, they are further delighting customers by streaming digital movies for their immediate enjoyment.
“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.”
The move could help guard against the possibility that US rival Netflix, which has more than 16 million subscribers, could invade the British market.
Last year Netflix – which has pioneered online video subscription – suggested that it was looking to expand internationally, and is believed to be targeting Europe.
“We’re now talking about other regions in the world,” a spokesman told the Canadian Broadcasting Corporation in December. Based on the early success of Netflix Canada, we’re going to continue our international expansion next year and we’re going to allocate significant dollars to it.”
Lovefilm remains a leading player in DVD rentals since launching in the UK in 2004, and has 1.4 million subscribers across Europe.
The company tripled its sales in 2009 to almost £100m, and in March last year launched its digital streaming service, enabling viewers to rent and watch movies over the internet.
The acquisition will be subject to European regulatory approvals, and is expected to close in the first quarter of 2011.
Simon Calver Lovefilm chief executive, 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.”
Within the past 12 months, Lovefilm has stepped up its movie streaming business, while leaving its physical DVD rental service to continue its growth.
In 2009, Lovefilm declared that online was now its “primary” business – despite online rentals representing a 10th of DVD and Blu-ray rentals.
Lovefilm customers can now also stream films over a number of internet-connected living room devices, including Sony and Samsung TV sets, and the PS3 games console.
Takeover talks between the companies are understood to have been hastened when Lovefilm was reported to be nearing an initial public offering. Investers in Lovefilm include European venture capital firms DFJ Esprit, Balderton Capital, Arts Alliance Media, and Index Ventures.
Lovefilm was formed by the merger of two European DVD rental firms, Arts Alliance Media and Video Island, in 2006. Two years later, the privately held Lovefilm acquired Amazon’s UK and German movie rental business, with the online retail giant taking a stake in the business as part of the deal.
The company now operates in five European countries: the UK, Germany, Sweden, Denmark and Norway.
Saul Klein, a partner at Index Ventures and the co-founder of Video Island, said the deal opens the door to a range of “mouthwatering” integration opportunities with Amazon’s existing assets, including the movie database IMDB.
“When you get to the scale of business of Lovefilm – doing £100m in revenue, being profitable and growing, not just in the UK – you end up having a lot of choices,” Klein said.
Read the full statement from LoveFilm here.