Amazon joins venture firms at Lovefilm

The venture-backed DVD rental business Lovefilm International has increased its number of subscribers to nearly a million after it acquired Amazon’s rival German and UK businesses as part of the deal.

Amazon has taken the largest stake in venture-backed Lovefilm International, as the DVD rental business acquired Amazon’s rival European and German businesses, according to a statement.

Terms were undisclosed but the deal values the consolidated Lovefilm at around £200 million, according to a source close to the deal. Amazon has also paid an additional undisclosed sum for its stake.

Lovefilm’s subscriber base will increase to more than 900,000, predominantly in the UK and Germany, but also in the Nordic countries.

Simon Calver, the chief executive of Lovefilm, said the deal had three main benefits: “First this gives us real critical mass in a pretty competitive market. Second from Amazon there’s a continual flow of customers from [the website] and third it’s a great partner in the business.”

In the next five to ten years digital would probably overtake DVDs as the medium of choice. But he said: “DVD is still the media of choice to get films into living rooms.” His business also provides digital downloads, which are free at times where there are postal problems.  

Venture firms DFJ Esprit, Balderton and Index Ventures merged portfolio business Video Island with Lovefilm for £80 million ($158 million; €106.6 million) to take a 50 percent stake in 2006.

At the time of the merger the combined group had more than 400,000 subscribers.

The company charges its customers £10 per month in the UK for its standard deal, although packages vary from £4 to £15 per month.

The statement said there would no job losses in the UK or Germany as a result of the transaction.