As sure handed as Amazon’s digital strategy seems to be, adjustments in forward planning are always necessary. On Monday, Amazon made such an adjustment with the rare move to exit a market they were already targeting.
According to the announcement, Amazon Europe will sell their online video rental service in the UK and Germany to LoveFilm International Ltd in exchange for an equity stake. Amazon will also invest cash. The move will allow Amazon to focus on its core retail business and digital strategies but still allow them to retain a beneficial interest in their prior DVD rental investment.
Over the past couple years, LoveFilm has quickly established itself as a leader in Europe’s fragmented market for online DVD rentals. Similar to Netflix’ business in the U.S., the company is active in the U.K., Sweden, Germany, Denmark and Norway. Their website is the 3rd highest trafficked Entertainment and Film site in the U.K. Last year, the company had annual sales growth of 368% on revenues of £27.6m.
With Amazon’s subscribers rolled into the services, LoveFilm’s subscribed user base will grow 50% from about 600k to 900k.
Financial terms haven’t been disclosed, but Amazon will become the company’s largest single shareholder. Estimates are that Amazon Europe will hold approximately thirty percent of LoveFilm International on completion of the deal.
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