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published:
05-Feb-08
territories:
Germany, UK
categories:
Merger/takeover/investment deal
Amazon and LoveFilm in UK/German online rental link-up
LoveFilm International (LFI) is to acquire Amazon Europe's DVD rental business in the UK and Germany, subject to regulatory approval. As part of the deal, Amazon Europe will make a cash investment in LFI making Amazon the company's largest shareholder. The two companies are to enter a multi-year marketing agreement in which Amazon Europe will promote LFI's services to its customers in UK and Germany. Following completion of this deal, LFI claims that its subscriber base will grow to over 900,000 customers predominantly from the UK and Germany, but also from Sweden, Denmark and Norway.
Although the number of subscribers to online subscription services continues to grow, Screen Digest research into the UK business shows that value growth in the sector slowed substantially in 2007. LFI is already the dominant player in this market, accounting for 62% of the UK online rental market in 2007 according to Screen Digest analysis; the deal with Amazon, which has now overtaken Blockbuster as the number two player in the online rental space, could increase this share to 78%.
In Germany LFI is in a very different situation, having launched as a start-up in 2006 in direct competition with three local players, local leading provider Amango, French online rental specialist Glowria and, of course, Amazon. Although data on the latter's German operations is hard to come by, Screen Digest believes the deal will catapult LFI into second place in the German market.
Our take...
LFI's motivation for entering into this agreement is straightforward; in one move it has attracted a powerful new shareholder, substantially increased its share of each online rental market and removed one of its key competitors.
For Amazon, however, the deal appears to mark a change of strategy. Active in the UK online rental sector since 2004 and in Germany since 2005, the company has never been particularly pro-active in promoting these services; indeed, despite steady growth, its involvement in online DVD rental has always appeared to be a defensive, rather than an offensive strategy. This theory helps explain the fact that, despite frequent rumours, the company has never launched an online rental service in the highly competitive US market.
Amazon's withdrawal from the emerging European online DVD rental sector could free up resources for the online giant to focus on rolling out online distribution of video (and other media) in Europe. This would continue the firm's establishment of itself in the US for digital distribution of music, movies, television, books that supports its core physical e-commerce business. Amazon's online video platform, Amazon Unbox, launched in US in September 2006; Amazon MP3 online music store followed twelve months later.
While Amazon will no longer directly offer DVDs for rental, once it has launched digital movies and music in Europe it will be able to leverage its position as a dual-format distributor. The model enables Amazon to potentially generate crossover sales by offering titles in both physical and digital formats - retail DVDs/digital movies, CDs/MP3s, books/e-books - which bridges the move towards a paid digital, rather than physical, distribution model.
The online retailer has already indicated digital delivery ambitions in Europe: in October 2007, press reports referred to an announcement by an Amazon spokesman that Unbox and Amazon MP3 would launch in Germany; in January 2008, the company confirmed that it would expand its online music store internationally within the year. In launching an online video service in Europe, Amazon faces stiff competition from the likes of Apple and Microsoft. Of these three major players, Microsoft is the only one to have launched an online video platform beyond the US - in Canada, UK, France, Germany and Ireland - with a relatively limited selection of movies from Warner Bros. Meanwhile, LFI operates its own online movie service in UK. However, Screen Digest believes that services such as LFI's, which are not hardware-driven to enable users to easily watch video on screens beyond the PC, are unlikely to achieve significant consumer penetration.
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Analyst, market intelligence & notices
Hi-def and DVD video forecasts revised
published:
14-Feb-08
territories:
Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Spain, Sweden, UK - Europe
categories:
Market data/forecast revision
Richard Cooper
Reports
(2) 1-2 showing
European Digital Terrestrial Television: Market assessm...
The latest report from Screen Digest provides a detailed analysis of the European
digital terrestrial television (DTT) market in 15 Western and 4 Eastern European markets.
The report includes historical and five year forecast household and penetration data for free,
pay and top-up DTT as well as penetration numbers for cable, DTH and IPTV.
published:
21-Jan-06
territories:
Austria, Belgium, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, Russian Federation, Serbia & Montenegro, Slovakia, Slovenia, Spain, Sweden, Switzerland, UK, Ukraine - Central and Eastern Europe
Guy Bisson
Chris Dziadul
Articles
DVD manufacturing-on-demand
DVD replication is suited to the on-demand model. Burn times have been reduced and the cost of components has fallen, so it is now a relatively quick and affordable procedure. The development of selfcontained replication units has made it possible for DVDs to be manufactured on-demand, and on-site, in retail stores and warehouses.
published:
23-Apr-08
territories:
Italy, France, Germany, UK, Spain, USA
Marie Bloomfield
DVD hardware overtakes the VCR
World DVD installed base outnumbers VCRs for first time
published:
01-Nov-07
territories:
Australia, Austria, Belgium, Brazil, Canada, China, Croatia, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Italy, Japan, Korea. Rep [S], Malaysia, Mexico, Netherlands, New Zealand, Norway, Philippines, Portugal, Russian Federation, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, UK, USA - Asia-Pacific, South and Central America, Central and Eastern Europe, Europe, International (exc.US/Canada), North America, Western Europe
David Scott
Hi-def formats compete for share
As the market for high definition DVD settles down we expect the balance to even out with a modest advantage in favour of Blu-ray
published:
14-Sep-07
territories:
USA, France, Italy, Germany, Spain, UK
Richard Cooper
European video software markets
DVD spending is stablising as the decline in prices decelerates. The East European market is catching up with the West. The market for VHS cassettes has all but disappeared completely. Growth in the DVD retail market was maintained in 2006, volume sales in Europe increasing by 10 per cent from 663.5m units in 2005 to 728.3m. Once again, however, the rise in the number of units sold did not fully translate into growth in value as the average consumer price of a retail DVD sank by eight per cent year-on-year from around €14.00 in 2005 to about €12.90 in 2006.
published:
06-Aug-07
territories:
Austria, Belgium, Croatia, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Netherlands, Norway, Poland, Portugal, Russian Federation, Spain, Sweden, Switzerland, UK - Central and Eastern Europe, Europe, Western Europe
Marie Bloomfield
Emergent online video streaming
Europeans are spending more of their web time on streaming video than their American counterparts
published:
06-Aug-07
territories:
France, Germany, UK, USA - North America, Western Europe
James Garlick
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Western Europe
Hardware Households
