Amazon to Buy Rest of Lovefilm to Compete With Netflix (Update1)

Amazon.com Inc. agreed to buy the remaining shares of Lovefilm International Ltd., a U.K.-based DVD and online film-rental service, to compete against rivals such as the U.S.’s Netflix Inc.

Lovefilm rents movies and television shows by mail and also streams content to Internet-enabled television sets and game consoles. Amazon.com’s purchase is expected to close in the first quarter of 2011, the companies said in a joint statement today. Amazon.com took a “significant minority” stake in Lovefilm in 2008 after selling its DVD rental business in the U.K. and Germany to the private company.

“Lovefilm will continue with the management as is,” Lovefilm Chief Executive Officer Simon Calver said in a phone interview today. “The benefit is we will have the support of Amazon to expand the business.” He declined to comment on terms of the deal.

Netflix, which has a market value of about $10 billion, expanded into Canada last year with a streaming-only service. It may expand internationally beyond Canada as early as this year, former Chief Financial Officer Barry McCarthy said in December.

Lovefilm’s investors include venture capital firms Index Ventures and Balderton Capital. It operates in the U.K., Germany, Sweden, Norway and Denmark.

Amazon.com’s existing relationship with film studios will enable Lovefilm to sign more deals to stream content online. “This will be better for our relationship with the studios,” Calver said.

In 2009, Lovefilm’s revenue rose to 97.2 million pounds ($154 million) from 73.1 million pounds a year earlier, according to accounts filed at Companies House.

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net. To contact the reporter on this story: Kristen Schweizer in London at kschweizer1@bloomberg.net.

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