Amazon Considering Acquiring U.K. Streaming Service

3 Jan, 2011 By: Erik Gruenwedel

Amazon is reportedly contemplating acquiring majority ownership of LoveFilm, the United Kingdom-based online disc rental and streaming service.

Amazon, which already owns 42% of LoveFilm through its U.K. subsidiary, would become principal stakeholder in a service (with 1.4 million subscribers throughout Western Europe) valued at about $312 million, according to the Sunday Times. It could also create a roadblock in Netflix’s burgeoning expansion plans abroad.

LoveFilm offers about 70,000 movies, the majority on DVD and Blu-ray Disc.

Amazon is already one of the largest sellers of movie discs, in addition to offering transactional video-on-demand, or iVOD. It was rumored to be launching a streaming service in the United States by the end of 2010 as in direct competition with Netflix.

In June 2009, LoveFilm considered a buyout of stakeholders in an effort to forward a planned public stock offering, which never materialized.

Analyst Michael Pachter with Wedbush Securities in Los Angeles said the move would expedite Amazon’s venture into streaming and allow it to more effectively compete against Netflix.

“They gain a streaming technology, inventory management system for DVDs (figuring out how many to order is an art), and a modest customer base that gives them hands-on experience before they launch here,” Pachter said.

Colleague Edward Woo said the move is definitely aimed at countering Netflix streaming.

“Given that LoveFilm is almost exactly like Netflix, it makes sense for Amazon to acquire them especially since they already own a stake in the company,” Woo said. “Everybody is aiming for Netflix, and I expect one or many more will copy their service soon.”

An Amazon representative was not immediately available for comment.