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Netflix, Lovefilm enter U.K. price war

Homevid companies fight for market share

LONDON — Blighty’s subscription VOD market began to heat up Monday as Netflix launched its streaming-only package at a cut-price rate.

The homevid operator will charge £5.99 ($9.25) a month in the U.K. and $8.91 in Ireland, coupled with a one-month free trial for users to sweeten the deal.

The launch, expected to be a costly one for the U.S.-based home entertainment service, prompted a price cut from Amazon-owned Lovefilm, which has dominated Blighty for years. Lovefilm will now offer unlimited streaming for $7.71 a month.

Both services have been adding to their content in the U.K. in the past six months, fiercely competing for streaming deals.

Since Netflix announced it would bow in Blighty, Lovefilm has inked expensive deals with indie distribs including eOne and Studiocanal, which will see the service offer titles including “The Twilight Saga” and “Tinker Tailor Soldier Spy,” respectively, exclusively in the pay TV window.

Lovefilm, which has 2 million subscribers, has deals with Sony Pictures, Warner Bros., ITV and BBC Worldwide.

Netflix will offer subs content from the BBC, ITV, Channel 4, Disney, MGM, Miramax, Paramount and Sony Pictures. It also has exclusive distrib deals with Momentum Pictures and Lionsgate U.K., although specifics have yet to be unveiled.

Netflix’s arrival is a welcome one for content providers, specifically independent film distributors, as the service and Lovefilm provide more lucrative options than pay TV operator BSkyB, which offers indies much smaller deals than the Hollywood majors.

But it looks set to be an uphill battle for Netflix: In late October, CEO Reed Hastings said in a letter to shareholders that the company “expects the costs of our entry into the U.K. and Ireland will push us to be unprofitable on a global basis; that is, domestic profits will not be large enough to both cover international investments and pay for global general and administrative costs, technology and development.”

After the company saw a sizeable customer exodus in the U.S. last year following its 60% price hike, Hastings said: “We are starting 2012 in the best possible way: By giving customers in the U.K. and Ireland an amazing entertainment experience.”

In preparation for the Netflix arrival, Lovefilm has bowed a pricey, large-scale marketing campaign, with glossy TV commercials and billboard ads.

“Customers tell us they love Lovefilm because of the value, choice and innovation we offer in subscription film and TV entertainment,” said Lovefilm CEO Simon Calver. “We offer customers an unparalleled range of titles.”

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