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Video Island and LOVEFiLM merge to create Europe's leading online home entertainment goup


LONDON, 6 April 2006: LOVEFiLM International Ltd and Video Island Inc, the owner of ScreenSelect.co.uk, today announce their intention to merge and create Europe's leading web-based home entertainment subscription service.

The deal, a 50-50 merger, will give the combined group more than 400,000 subscribers and a strong position in the UK market with around 17% of all DVD rental transactions; as well as strong market share in Sweden, Denmark and Norway. Both companies will be consolidating under the LOVEFiLM consumer brand.

The group will offer customers the largest DVD library in Europe, with more than 70,000 unique titles and 1.2 million DVDs and Video games, as well as a fast-growing Video-on-Demand (VoD) service. The new company will ship more than two million rental DVDs every month.

Both companies currently work with major partners including AOL, CD Wow, Channel 4, Dixons Store Group, easyGroup, Guardian Newspapers, ITV, MSN, News International, Odeon, Sainsbury, Tesco and Vue Cinemas, some of whom offer a fully white-labeled service.

In the year to December 2005, sales of the combined group were more than 25m and the group turned profitable in December 2005.

The deal will bring together a strong investor base including Arts Alliance Media (AAM), the majority shareholder in LOVEFiLM, alongside Video Island's backers Benchmark Capital, Index Ventures, Cazenove Private Equity, and European Venture Partners.

Following the merger, Arts Alliance Media will provide video on demand and electronic sell through services to LOVEFiLM International under a long term commercial arrangement.

The new executive team will be a combination of the two firms, with Simon Calver, the current CEO of Video Island becoming the group's CEO. On completion of the merger, LOVEFiLM's CEO Mark Livingstone will step down and act as consultant to the group.

The new company plans to exploit synergies on marketing, technology, distribution and operations to grow profits faster and accelerate expansion across Continental Europe. The merged group believes it will be better positioned to exploit these opportunities and be more competitive against US rivals such as Amazon, Blockbuster and potentially Netflix.

In addition, the larger customer base and stronger finances will allow it to capitalize further on new technologies and delivery methods including Video-on-Demand and the recently launched Download-to-Own service.

Simon Calver said: 'For three years both companies have done an excellent job changing the way DVDs are rented in the UK and Scandinavia, by providing customers with unparalleled value, choice and convenience. Together we will be a stronger company offering better features and service. I am delighted to lead this talented team and make it a force in the European Home Entertainment market.'

Mark Livingstone. 'I am privileged to have led the creation of LOVEFiLM over the last 2 years. The new combined management represents a world class team and I believe the company will now become a major force to be reckoned with in the entertainment world.'

LOVEFiLM and Video Island were both advised by Altium, the mid-market investment bank, during the merger. The deal is subject to shareholder approval.

For more information please contact:

Simon Calver, Video Island 020 8951 9850
Mark Livingstone, LOVEFiLM 020 7751 7500

M: Communications 020 7153 1530
Nick Fox 0207 153 1540/07711 727 618
Gemma Knowles 020 7153 1523
xx


Publisher Contact Information:

Video Island (Merged with ScreenSelect)
+44 (0)20 8951 9850
-

Company profile of Video Island (Merged with ScreenSelect)
Past press releases of Video Island (Merged with ScreenSelect).

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