Is Amazon killing Lovefilm?

I’ve been a Lovefilm subscriber for years now. Originally I shared an account with my ex-girlfriend, but when I moved into my own place, I went for one of the top packages.

The main reason for my choice was videogame rental. There are several options for streaming films online, but Lovefilm was the only option which also allowed me to rent Xbox 360 games, and given the relatively high purchase price for new titles, it seemed a more than reasonable investment. Especially as it would allow me to cover more games for my various websites.

I hadn’t seen the news that Lovefilm announced new customers would be unable to sign up for videogame rental last week, but I certainly noticed the email I received to tell me that as an existing customer, Game Rentals will end on August 8th, and I’ll be moved onto a different package.

 

No logic for Lovefilm?

I don’t work at Lovefilm or have any involvement in their business decisions, but I can venture some guesses why the decision has been made.

Until very recently, Microsoft was very determined to lock down access and sharing of games on the forthcoming Xbox One platform – that stance has softened since the big E3 videogame show due to the wide backlash, but it’s a sign of changes in the videogame industry. Publishers have long been concerned about sharing and secondhand sales which do not generate any direct revenue, so the combination of publishers and a major console manufacturer may have convinced Lovefilm that the future is purely in digital releases, and the hassle of purchasing and sending out disc copies wasn’t worthwhile.

By the same token, Amazon has recently merged Lovefilm and Amazon accounts. Taking a more active role with Lovefilm may have included the fact that videogame rentals detract from the sale of new and secondhand games via Amazon. Given the relative price difference and purchase habits of gamers versus film fans, it’s probable that rental takes a larger chunk of prospective purchases and revenue – as someone is ‘borrowing’ a £40 game vs a £10 film. In the case of the new consoles, Amazon is currently listing games at £54.

Presumably that difference is greater than the loss from ex-game rental customers who are being moved onto slightly cheaper packages – in my case the automatic saving is around £36 per year.

 

No Love for Lovefilm:

There’s been a fair amount of outcry regarding the decision on various gaming sites. Personally, I had intended to stay with Lovefilm indefinitely, particularly with new consoles arriving this autumn. While I may be able to justify a console and a game or two at launch, I certainly hoped to rent a significant amount of the new games.

But looking at my new Lovefilm package, I’d automatically be paying £9.99 per month for 2 discs per month + unlimited streaming. Given than more than 50% of the titles on my rental list are games, and will therefore no longer exist, I could save £5 more a month for streaming only.

So Lovefilm has just gone from:

• 12 x 12.99: £155.88 annual revenue
• 12 x 4.99: £59.88 annual revenue

That’s a loss of £96 per year Lovefilm will have lost from me personally, whatever happens. But now I’ve looked at the subscription costs, and weighed up the value I get from the current streaming selection.

Netflix is around the same price for streaming, and with a 1 month free trial it’s probably worth me trying them to see how their digital selection compares, which I wouldn’t have previously considered.

NowTV seems pretty expensive at £15 per month for films.

But actually, there may be a third option. I’m a big fan of accessing digital entertainment via subscription services, and all my music and film purchases have pretty much been replaced for the last few years. But the changes and restrictions have made me more motivated to finally invest in a decent amount of digital storage and get around to backing up copies of all the entertainment I own to be able to stream throughout my house.

That potentially gives me £155.88 to spend on DVDs, and around £120 a year to spend on CDs (Cancelling Spotify). And there are plenty of games, films and CDs to be found in secondhand and charity shops which will keep me entertained for the significant future…

Things to consider, along with the widely-reported faff of cancelling, which involves having to phone Lovefilm Customer Support….