UK: Online DVD rental firms to merge
Online DVD rental firms Lovefilm and Video Island agreed to merge today to bulk up against US competitors and defend their 17% share of the UK market.
The tie-up will create a company that ships two million DVDs to more than 500,000 subscribers in the UK every month and has a strong footprint across Sweden, Denmark and Norway.
Both firms will unite under the Lovefilm consumer brand and the 50-50 merger gives them greater scale to compete against US giants Blockbuster and Amazon.
It will also allow them to generate savings on marketing, distribution and technology to grow profits faster after moving into the black in December.
Revenues from the combined group totalled £25m (€36m) last year although this will rise if it succeeds in expanding across continental Europe.
It is the second merger to be undertaken by Video Island in less than two years following the combination of its operations with ScreenSelect in August 2004.
Simon Calver, chief executive of Video Island, will take up the same role at the enlarged group with Lovefilm boss Mark Livingstone stepping down to become a consultant.
Mr Calver said: “For three years both companies have done an excellent job changing the way DVDs are rented in the UK and Scandinavia, by providing customers with unparalleled value, choice and convenience.
“Together we will be a stronger company offering better features and service.”
The enlarged group will have a library of more than 70,000 individual titles and 1.2 million DVDs and video games.
Following the merger, Arts Alliance Media (AAM) – the largest shareholder in Lovefilm – will provide a video on demand (VoD) service to the company under a long-term commercial agreement.
