Lovefilm Buying Two Of Amazon’s European DVD Rental Businesses

Amazon (NSDQ: AMZN) is selling its UK and German online DVD rental businesses to London-based Lovefilm for an undisclosed sum and making a cash investment that sees it become the DVD and download distributor’s largest shareholder. The pair are also striking a marketing agreement that will see Amazon promote Lovefilm services on its UK and German sites.

So Lovefilm is effectively becoming an Amazon brand in those countries through this investment – an extension of white label deals it already has to power DVD rental services from the likes of Tesco. Amazon will continue to run the businesses “for a period of time” before Lovefilm will “welcome all Amazon Europe customers to the Lovefilm service”. The deal will give Lovefilm around 900,000 customers (it had previously claimed 600,000), mainly in the UK and German but some others in Scandinavia. Amazon’s European retail VP Greg Greeley (via release): “Our investment will enable Lovefilm to grow the business further.”

Financed by Arts Alliance Media, Lovefilm merged with Video Island in 2006 to create one of Europe’s largest online DVD rental stores. It has a library of over 65,000 titles. Video Island was financed by Index Ventures, Balderton Capital and DFJ Esprit. Lovefilm launched downloads for rental and ownership in 2005 but has blamed slow uptake on studios’ high wholesale prices. Amazon had been offering two DVDs per month for £3.99 ($7.94), up to a £14.49 ($28.83) fee for unlimited monthly rentals.