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Amazon to Buy Rest of Lovefilm to Compete With Netflix

Jan. 20 (Bloomberg) -- Amazon.com Inc., the largest online retailer, agreed to buy the remaining shares of Lovefilm International Ltd., a U.K.-based DVD and Internet film-rental service, to compete with rivals such as Netflix Inc.

Amazon paid $320 million for the stake it didn’t already own, according to three people familiar with the matter, who requested anonymity because the terms are private. The purchase is expected to close this quarter, the companies said in a joint statement today.

Amazon’s existing relationships with film studios may help Lovefilm sign more deals to stream content online. The Seattle-based e-commerce company is expanding its selection of digital music, movies and games, and in November introduced Amazon Studios, a project that gives filmmakers and writers a platform for their movie ideas.

“Lovefilm will continue with the management as is,” 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.

Lovefilm rents movies and television shows by mail and also streams content to Internet-enabled TV sets and game consoles. Amazon.com took a minority stake in Lovefilm after selling its DVD rental business in the U.K. and Germany to the private company in 2008.

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.

In 2009, Lovefilm’s revenue rose to 97.2 million pounds ($154.4 million) from 73.1 million pounds a year earlier, according to accounts filed at Companies House.

To contact the reporters 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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