Stream or Split, Says Amazon

This week Amazon announced it will be closing down its Lovefilm business in both Germany and the UK. It had already closed down its Scandinavian operations in 2013.

Lovefilm (like Netflix in the US) is a DVD-by-mail rental service. For a monthly fee subscribers can list the titles they want and the company will then send them the DVDs by mail. After viewing the film, they mail it back via paid envelopes and another movie is then sent out to them.

Lovefilm was acquired by Amazon in 2011, when the Internet retail giant became interested in the home video market, and rumors of Netflix's expansion into Europe were starting to circulate.

While some readers may be choking on their coffee, amazed that people still rent DVDs, Lovefilm's demise has generated some rather unhappy responses from current users. Yes, there's people out there still doing strange things with physical media.

Most responses are from residents in rural communities with slower broadband speeds, where streaming options tend to come with re-buffering stalls bundled with the experience. But others bemoan the loss of quirky foreign films and older classics that may not be available for streaming: Lovefilm's catalog included 80,000 titles while according to estimates, Amazon's streaming service currently offers 25,959 titles.

Amazon cited "decreasing demand for DVD and Blu-Ray rental" as more customers moved to streaming, and there's no doubt it makes more sense to push streaming services in the future. Meanwhile Netflix still has its DVD rental business, but the company's marketing spend on the service must be fast approaching zero. Put it this way: If it was a person, no one would sell it life insurance.

The responses to Lovefilm's end-of-days are interesting on three counts. Firstly, there are still people who don't do everything over the Internet. Not many, to be fair, but they are out there and they are a market.

Secondly, broadband connections have yet to reach many rural homes even in first-world countries. British incumbent BT estimates that 95% of UK homes will have broadband connections of 24 Mbit/s by the end of this year, but it's the "Final 5%" that present the greatest challenge. That's still a hurdle, but also an opportunity for more traditional forms of content distribution.

Lastly, it seems that it is still easier to license titles for DVD than for streaming despite the dramatic ramp-up of online video. Amazon is able to deliver almost 55,000 more titles via its DVD service than its streaming service. It appears rusty value chains evolve more slowly than even the cynical can imagine.

— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation

James_B_Crawshaw 8/21/2017 | 9:36:26 AM
Re: Farewell I've been a happy Lovefilm customer for many years and will be disappointed to see the discs disappear. It was a sad day when Amazon killed the Lovefilm website and buried it in the rest of their shopping mall. Finding content became a lot harder. Yes, I like the foreign movies that aren't available to stream too. Presumably they could hire an intern to negotiate the streaming rights and upload them to a server ...

The content discovery/navigation process on the TV (I use a Samsung TV app) is also not as good as on a website with a keyboard and mouse. You just end up carouseling through dross rather than filtering and finding relevant content. 

Rant over. Time to move on and read a book. 
Marketin12124 8/18/2017 | 4:33:15 AM
Re: Farewell I was one of the people surprised to see that the LoveFilm DVD service was still available in the UK and Germany, having moved to the Amazon Video streaming service many years ago.

However, living in a major city with a choice of Superfast Broadband providers, streaming makes much more sense.  The Amazon Video service has far fewer titles than LoveFilm but for most people 25k titles is still a good selection, and I assume some of the excellent Amazon Original content is only available by streaming.

The issue around this change is much more about accessibility for the mainly rural 5% of the population who don't have access to reasonable broadband, despite statements to the contrary you need a good quality 10Mbps connection to support streaming, and this isn't available to many of the 5%.

The UK governemt are looking to introduce a legal Universal Service Obligation (USO) for broadband of 10Mbps at a "reasonable cost" once this is in place the reasons for having a DVD mail service (Obscure Foreign Language Films aside) will disappear.  However until that time a small number of customers will suffer.

I have some sympathy for Amazon.  I suspect LoveFilm is marginally profitable and set to lose money as fewer and fewer people stop using the service.  There is not USO for DVD rentals.

The worry is that the USO will face legal challenges and some of the 5% will get 10Mbps but a small percentage will still not be economically viable because of the remoteness of their location.  BT have already offered to invest £600m voluntarily to head off the legal USO.  You have to feel some sympathy.  They too are not a charity and they know that some of the remotest communities, for example the Highlands and Islands are not economically viable to deliver Superfast (>24Mbps) or Ultrafast (>100Mbps). 

At the end of the day a small number of customers will suffer, but hopefully they will soon be able to stream an alternative service in their homes soon...unless they are in a really remote location.
Michelle 8/17/2017 | 2:08:22 PM
Farewell There's a lot going on in this article! Old service dies a painful death AND broadband isn't everywhere yet. Really.

Might Amazon decide to stream the DVD collection? Will some of the rual areas get better service in the near future? Ever?
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