Amazon buys Lovefilm

One of the earlier posts on this blog concerned my predictions for the future of the company Lovefilm. You may remember I was less than totally convinced that it would thrive in an environment where digital download/streaming/piracy was becoming so much easier. I noted that environmental change had allowed Lovefilm to replace companies like Blockbuster.

Amazon clearly disagrees with me: Amazon takes full control of Lovefilm . The price is believed to be about £200m. Much froth at the Lovefilm webbie: BREAKING NEWS: AMAZON TO BUY LOVEFiLM.

Amazon sold its own DVD rental operation to Lovefilm a couple of years ago. I'm intrigued to see what they will do with the company in the medium to long term - the Guardian article notes the recent upsurge in members streaming via a games console - and my prediction is that they will try and evolve it towards being digitally/internet focused, rather than physical media focused.

As for me - after being a member for nearly ten years, I think I'll be cancelling my subscription at the end of the month. Nothing political, I just don't feel I get better value than I would on a pay-as-you-rent basis via my Apple TV - on which note: Users now watching more Netflix on Apple TV than on iPad. Netflix to come to the UK, entering via Apple is my second prediction

Lovefilm and Blockbuster

In the last post I mentioned that my VCR had been taken out and put down for humane reasons. I also noted that for organisations that were founded and grew on serving markets related to video rental, the advance of technology was a significant issue.

Blockbuster evolved, moving from cassettes to discs, and from films to a range that included games, TV series and an unhealthy amount of sweets and chocolates. That kept them going for a while - but about 8 years ago a severe blow was struck by a new entrant - Lovefilm

Lovefilm operates in a very different way to the traditional video rental companies like Blockbuster. Disc only - for films and games. No retail outlets - customers/subscibers receive films and return them via mail. Films have no time limit, and you can choose a package to allow you a fixed number of titles at home. You pay by the month, not by the film.

Plus points - no need to watch a film the night/weekend you rent it. No having to return the films to the retailer you got them from. Subscription means you know exactly how much you will be paying. Management of your films/account online 24/7. Downside? You queue films, but can't be sure of which ones you'll get. There will probably be a two day delay between a disc being dispatched and it ariving in the mail - the same the other way as you return discs.

This model was replicated by other firms - most notably Amazon. Over time though, through brand building, stock management and superior customer services, Lovefilm bought or defeated most rivals - even taking over the Amazon service. Poor old Blockbuster has tried to catch up, but never quite managed it. I'm afraid I don't hold out much hope for their survival in the long term.

Lovefilm came to dominate their market by taking advantage of possibilities allowed by adopting a different supply chain. They in turn though are coming under pressure from technological developments - namely, digital distribution.

Consumers now have a number of options to receive and watch media they haven't had before. The BBC iPlayer, Freeview/Sky boxes with ability to revord HD programmes and of course internet based distribution - legal or otherwise!

A recent option is the new Apple TV product. Why wait for the film in the mail when you can select and view it within moments?

Lovefilm haven't been caught out by these developments, and now offer films to view on your home PC as well as discs in the mail. What remains to be seen is if this hybrid approach can compete against purely digital distribution - and the ability to conveniently watch on the living room TV, rather than a computer screen.

Not to worry the Lovefilm management, but I've been a subscriber since 2002, and I'm now thinking of cancelling.