Amazon to acquire Lovefilm

Amazon is to acquire film and games subscription service Lovefilm, in a move that will broaden its video streaming and rental capabilities.

Amazon has bought Lovefilm, the video streaming and rentals service. Photo credit: Thox on Flickr

The deal, announced on Thursday, is expected to close in the first quarter of 2011, subject to closing conditions and regulatory approvals. The agreement is worth £200m, according to reports.

If the purchase goes through, Amazon will wholly own Lovefilm, a London-based company that offers streaming video services to the European market, along with physical rentals and sales of games and films.

In a statement, Seattle-based retail giant and cloud specialist Amazon said that it already had a "significant minority holding" in the entertainment service. In its annual report for 2010, Amazon said that it had made a $53m (£33.2m) "non-cash gain" on the sale of its European DVD rental assets, which it sold to Lovefilm.

"Lovefilm and Amazon have enjoyed a strong working relationship since Lovefilm acquired Amazon Europe's DVD rental business in 2008," Greg Greeley, Amazon's vice president of European retail, said in the statement. "We look forward to a productive and innovative future."

Lovefilm said 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.

Online video

"I think we can clearly expect Amazon to be selling online video from here on in," said James Governor, principal analyst of analysis firm Redmonk. Amazon has a dedicated globe-spanning cloud infrastructure, which offers cloud services through Amazon Web Services (AWS).

I think we can clearly expect Amazon to be selling online video from here on in.

– James Governor, Redmonk

"Streaming of video is a huge infrastructure requirement," Governor said. "There's basically no bigger data source than video, so in terms of competing around data volumes and being able to manage them at scale, it's absolutely right that Amazon would see video as a content type it would be wanting to manage and serve."

The move will see competition heighten between Amazon and US video subscription service Netflix, he added. 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.

Because Amazon owns Cloudfront, the company is "not going to be beholden to Akamai", Governor said. "[Amazon is] going to push for dominance in the UK market and build out from there."