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