Amazon to acquire the UK’s film and games subscription service Lovefilm

As it seeks further expansion in the UK, US based online retail giant Amazon Inc. reported it is to acquire UK based film and games subscription service Lovefilm. According to Amazon, the investment is targeted at enhancing its video streaming and rental capabilities. Amazon announced its plans Thursday, with the investment expected to close in the first quarter of 2011. However, the investment is still subject to closing conditions and regulatory approvals.

The financial details of the investment were however not released but reports have pegged it at a consideration of £200m. If successful, the investment will give Amazon increased access to the European market, as it gives it 100% ownership of Lovefilm, a London-based firm that offers streaming video services to the European market, along with physical rentals and sales of games and films.

Currently, Amazon noted that it already controls a "significant minority holding" in the London firm. The Seattle-based retail giant and cloud specialist made a $53m (£33.2m) "non-cash gain" on the sale of its European DVD rental assets, which it sold to Lovefilm.

In a statement, Amazon reiterated that it has enjoyed a strong working relationship with Lovefilm ever since Lovefilm acquired Amazon Europe's DVD rental business in 2008. Greg Greeley, Amazon's vice president of European retail, said in the statement that Amazon looks forward to a productive and innovative future.

According to Lovefilm, it has more than 1.4 million members in the UK, Sweden, Norway, Denmark and Germany, who can choose from over 70,000 rental titles. The company also provides the Lovefilm Player, which delivers films over the internet to members' TVs and PCs. All subscribers can get access to the player, and those on an unlimited Lovefilm package can do so at no extra cost.

In the UK, Amazon sells films on DVD and Blu-ray, as well as PC and video games. It also has a store for MP3 music downloads. In the US, it has a video-on-demand service for digital movie rentals and purchases.

The move will see competition heighten between Amazon and US video subscription service Netflix, analysts said. Netflix uses content-delivery networks from Akamai, Level 3 and Limelight to help it cache video content for speedy transmission to customers. Amazon has its own content-delivery service named Cloudfront.

However, because Amazon owns Cloudfront, the company may not be willing to be beholden to Akamai.

23 Jan 2011.