Lovefilm chief on why they fell for Amazon

EIGHTEEN months ago Simon Calver faced a dilemma. Lovefilm had increased its sales by a third in 2009 to almost £100m but needed further funding to secure its expansion.

The online DVD rental firm had been growing its footprint across Europe through new service launches and deals with platform operators such as Sony Computer Entertainment and Samsung, but it needed more investment.

Listing on the London Stock Exchange was one option but according to Mr Calver, the timing wasn’t right. “We were looking at lots of different options but it was a hard market for flotations,” he said.

Another option was selling the company. American internet retailer Amazon already had a 42 per cent stake in the company and was keen to attack the video streaming market via Lovefilm’s service.

Mr Calver said: “It was a tough decision to sell the company because we had seen it grow. However, the reality was that we were looking at all the different options for the company and Amazon was the best strategic fit. They had known us for a long time and had ambitious plans for growing the business.

“They want to keep us as a stand-alone business and an individual brand within their overall portfolio, a combination that will help us to be very successful.”

The takeover, which was announced in January after months of negotiations, is still very new and will require a few adjustments for Mr Calver and his team. “Now we are part of Amazon we have to think bigger than we have before,” he said.

Mr Calver, who took part in the World of Work week at Hull University where he studied computer science in the mid-Eighties, shared some of the secrets of his successful career with students as well as business people from across the region.

Before taking the helm at Lovefilm, he previously held senior management positions at firms including Pepsi, where he launched the Pepsi Max brand, and Dell. He went on to become chief executive of Video Island, a company which merged with Lovefilm in April 2006.

The company has undergone rapid growth in recent years but in 2007, following the merger with Video Island, the business took a risk. With £2.5m in the bank, it spent £2m on a television campaign.

The gamble paid off and partners started to approach the business and film studios realised it was promoting film rather than competing with the studios.

Later that year, Amazon came knocking. Investors were against a sale of Lovefilm at the time so Mr Calver asked Amazon to join Lovefilm instead. Amazon took a significant stake in the company and brought more customers on board.

Lovefilm, which has more than 1.6m subscribers, began as a pure DVD rental company in 2002. Since then, it has made a combination of 11 mergers and acquisitions across Europe and expanded its services.

Now, for a monthly fee, subscribers can receive movies and TV shows through the post or watch them over a broadband internet connection.

“You have to have a strong customer proposition,” said Mr Calver. “Our model is built on having choice and having the value proposition which is so important in the current climate. We have enhanced our services through blu-ray and streaming at no extra cost. Our service is convenient for customers.”

On-demand online streaming is one area that the Amazon deal aims to grow. Mr Calver sees its main competitors as Sky and Virgin Media.

Although it faces increasing competition, Mr Calver is convinced Lovefilm is in a good position for continued growth and believes the company’s success is down to his staff. “To be a success you have to hire the best possible people you can,” he said. “We have a fantastic team, nearly 500 people across the whole system, who continue to make it work.”

Four per cent of UK households subscribe to Lovefilm. “The only thing that keeps me awake at night is how to get the other 96 per cent,” said Mr Calver.

Career path that lead to star role

Simon Calver, chief executive of Lovefilm, graduated from Hull University with a degree in computer science in 1985.

His first job was in sales and marketing for Unilever. He later joined Pepsi with whom he travelled the world and became UK vice-president at the age of 29. He was also behind the launch of Pepsi Max, Pepsi Blue and the development of the Pepsi Music activity.

After a stint at Dell, he moved to the educational CD-ROM business Riverdeep. The commute between Dublin and San Francisco took its toll, and he returned to the UK to take over at Video Island in 2005 which merged with Lovefilm a year later.

Lovefilm operates in Germany, Sweden, Denmark, Norway and the UK.

In 2009, Mr Calver was recognised by Ernst & Young as Entrepreneur of the Year for London and the South East reaching the national finals.