Amazon to Buy European Movie-Rental Service Lovefilm

Updated (AMZN) is buying Lovefilm, a European game- and video-rental-by-mail company that some have called the Netflix of Europe, for an undisclosed price. The acquisition, which Amazon expects to complete by the end of March, will give the world's largest online retailer a stronger foothold in digital-video distribution.

The news follows yearslong rumors -- and related periodic stock spikes -- that Amazon could acquire U.S.-based Netflix (NFLX), the leader in the DVD-by-mail business. Like Netflix, Lovefilm is a subscription service that delivers entertainment via mail and also by streaming films and TV shows over the Internet.

The acquisition highlights Amazon's efforts to dominate the digital delivery of movies and TV shows in Europe, just as Netflix has done in the U.S. Americans last year spent $2.5 billion buying or renting digitally delivered videos, more than triple the $800 million they spent in 2005, according to the Digital Entertainment Group.

Lovefilm, founded in 2004, boasts nearly 1.6 million members in the U.K., Germany, Sweden, Denmark and Norway.

The announcement comes a week before Amazon is scheduled to report its fourth-quarter and full-year earnings for its fiscal 2010. In October, the company posted a third-quarter profit that rose 16% and revenue that jumped 39%, from a year earlier, on surging sales of electronics, such as its Kindle e-book reader.

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