Lovefilm Gives Amazon European Muscle

Amazon.com (Nasdaq: AMZN  ) is now the Netflix (Nasdaq: NFLX  ) of Europe. Well, sort of.

The American e-tailer just acquired London-based movie rental firm Lovefilm. Amazon already had a minority stake in the business after selling its German and British movies-by-mail operations to Lovefilm in 2008. According to Bloomberg and its anonymous sources, the price for the remaining shares was something like $320 million.

In effect, Amazon is buying back the European operations it wanted to get rid of three years ago, refined by a period of independent existence and bolstered by a series of acquisitions across Western Europe along the way. It is not, however, getting its hands on a fully formed Netflix clone. Lovefilm today is more like the Netflix of five years ago.

The service has a total of 1.4 million subscribers across Germany, the U.K., Sweden, Norway, and Denmark. The content library contains 70,000 titles, including DVD and Blu-ray films, digital streams, and video games. Its streaming service is starting to appear on connected TV sets and can be used through Sony (NYSE: SNE  ) PlayStation 3 video game consoles. Lovefilm has about 5,000 titles available for digital streaming.

By comparison, Netflix had nearly 17 million members as of the latest earnings report (and probably closer to 20 million by now), with support for its streaming service on any respectable digital media platform from Apple's iPads to all three of the modern game consoles and tons of connected Blu-ray players. The company no longer reports the size of its massive catalog, but had more than 100,000 DVDs and 12,000 instant choices available two years ago.

That said, having Amazon's enormous resources at its side should help Lovefilm accelerate its growth. It also doesn't hurt to have more than a decade of relationship-building movie retail experience at Amazon, which should help Lovefilm expand its content library as well. If and when Netflix decides to take the next step in its international growth plans, Amazon should provide a formidable challenge in European markets thanks to a few years' worth of head start.

Lovefilm is unlikely to add to Amazon's bottom line for some time, given the small size of the operation and the costs of running a transcontinental mail-order subscription service. But in the long run, this acquisition could be a pivotal moment in the history of global movie rentals.

So Netflix started its worldwide engines in Canada and Amazon just joined the race an ocean away. Where are Apple and the movie studios themselves? Nowhere to be seen, except in piecemeal pay-per-view services.

Add Amazon and Netflix to your watchlist to keep track of this game-changing race.

Fool contributor Anders Bylund owns shares of Netflix but holds no other position in any of the companies discussed here. Apple, Amazon.com, and Netflix are Motley Fool Stock Advisor selections. Yes, our flagship service likes forward-thinking media businesses. The Fool has written puts on Apple. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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