Amazon acquires Lovefilm, the Netflix of Europe

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Signaling its looming presence in the subscription movie rental market, Amazon.com has acquired Lovefilm, a company similar to Netflix that operates in Europe.

Amazon, which already owned a stake in the London and Luxembourg-based company, has fully acquired the shares it already did not own. Financial details were not disclosed, though the Financial Times reports that the deal valued Lovefilm at about $317 million.

The acquisition marks a return to the DVD rental business for Amazon, which previously had such an operation in Great Britain and Germany but sold it to Lovefilm in 2008 in return for stock.

Like Netflix, Lovefilm ships DVDs through the mail and streams movies over the Internet to subscribers for a monthly fee. It also ships games, unlike Netflix. The company has 1.6 million members and operates in Britain, Germany, Sweden, Denmark and Norway.

The deal comes as Amazon is preparing to launch an online movie subscription business in the United States that would compete with Netflix’s popular streaming service, according to people familiar with the matter. The Seattle-based company could potentially use Lovefilm’s technology to help it launch that operation.

Amazon could also use its relationships with Hollywood studios and base of customers to help grow Lovefilm in Europe.

Netflix has quickly become a dominant force in the DVD rental business, with nearly 17 million subscribers as of Sept. 30. Its stock rose more than 200% in 2010, leading potential competitors to jealously eye its success and some in Hollywood to wonder whether Netflix is making too much money from their content.

-- Ben Fritz