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'Stay at home' economy gives Lovefilm a happy ending

Lovefilm, the online DVD rental site, expects to grow its customer base by up to 70pc this year due to the growing 'stay at home' economy and its recent acquisition of the UK and German DVD rental businesses of Amazon, the US retailer.
 
Simon Calver, Lovefilm's chief executive, said that the credit crisis is forcing people to stay in to save money, something that is playing into the company's hands.

The bullish forecast comes as the company, which allows customers to rent DVDs for an unlimited time before posting them back, prepares to file its accounts for the financial year to December 31 2007.

These figures will show that sales at Lovefilm were £49m over the year, up from £41m over the 18 months to December 31 2006. The company made an operating loss of £7.4m, compared to a loss of £12.3m over the previous 18 months.

However Mr Calver said that since the start of 2008 Lovefilm has started to generate profits from its operations for the first time. It also expects revenues over the year to be over £70m, up from £49m last year.

"The 'staying in' trend is really suiting Lovefilm," said Mr Calver. "The business is consistently demonstrating its strength in the recessionary environment because people are spending more time at home," he added.

Mr Calver said that Lovefilm's business model – which puts no cap on the number of DVDs that can be rented each month and charges no late fees – gives more value for money than traditional rental models. Lovefilm offers 65,000 titles, including movies such as Home Alone.

In April Lovefilm acquired Amazon's UK and German DVD rental operations in April for £61m. As part of the deal, Amazon made a cash investment in Lovefilm and became its largest shareholder. In its results statement Lovefilm says that it is possible that new digital technologies, such as downloads, "will take hold quicker than currently envisaged". It says that it "may be unable" to maintain the same market share in downloads as it currently holds in DVD rental. "To date, however, has been at the forefront of new technological developments in this sector," the company said.