Online connection

Firms wed to create European download giant

LONDON — Blighty’s online rental firms Video Island and Lovefilm, which is pacting with Universal to bow the U.K.’s first download-to-own service April 10, are merging to create Europe’s leading online subscription service.

The new company will be a 50-50 merger under the Lovefilm brand. The combined group will have more than 400,000 subscribers and account for 17% of all U.K. rentals and will have a strong presence in Scandinavia.

The management team will combine execs from both firms under Video Island CEO Simon Calver as the group’s CEO. On completion of the merger, which is subject to shareholder approval, Lovefilm’s CEO Mark Livingstone will become a consultant to the group.

“For three years, both companies have done an excellent job changing the way DVDs are rented in the U.K. and Scandinavia. Together we will be a stronger company offering better features and service,” said Calver in a statement.

Blockbuster, the rentals market leader, still has 720 stores in the U.K. but Blockbuster Online is lagging way behind in the race to attract online customers.

Lovefillm and Video Island are backed by private equity firms. Lovefilm’s major shareholder is Arts Alliance Media and Video Island, which also owns ScreenSelect.co.uk, is backed by Benchmark Capital, Index Ventures, Cazenove Private Equity and European Venture Partners.

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