LoveFilm: Selling to Amazon - The Deal From Both Sides of The Table
Feb 18, 2020
auto_awesome
In a live episode, William Reeve and Simon Cook discuss the complicated sale of LoveFilm to Amazon. They share insights on the negotiation process, the motivations behind the deal, and the unexpected outcomes. The chapter includes discussions on the challenges of being a CEO, reliable business internet in London, security frameworks for startups, and the importance of people in company success.
The acquisition of LoveFilm by Amazon involved multiple parties and was one of the most complicated business sales in recent history.
Venture capital plays a crucial role in financing startups and requires navigating complex investor relationships.
The emergence of digital technologies has transformed the business landscape, requiring companies to adapt and embrace innovation in order to succeed in the digital age.
Deep dives
The Complex Deal and Negotiations behind Amazon's Acquisition of LoveFilm
The podcast episode discusses the complex deal and negotiations behind Amazon's acquisition of LoveFilm. The speaker explains that the deal involved multiple parties and stakeholders, including investors, founders, and Amazon. The deal was characterized by various complications, mergers, and disputes, which made it one of the most complicated deals in their lives. The episode provides insights into the challenges faced during the acquisition process and highlights the importance of building the best product and focusing on customer satisfaction for success in the digital space.
The Role of Venture Capital in Financing Startups
The podcast also explores the role of venture capital in financing startups. The speaker mentions that venture capital involves people with money providing capital to people with ideas, aiming to create new opportunities. The history of venture capital is briefly touched upon, highlighting its origins dating back hundreds of years. The speaker emphasizes the importance of building a strong business and securing financial backing while navigating the complexities of investor relationships.
The Impact of Digital Transformation on the Business Landscape
Another key point discussed in the episode is the impact of digital transformation on the business landscape. The speaker explains how the emergence of digital technologies changed the dynamics of the DVD rental market, leading to the rise of subscription-based models like LoveFilm and Netflix. The shift towards digital also presented new challenges and opportunities, requiring companies to adapt and invest in content rights and technology infrastructure. The episode underscores the significance of embracing innovation and anticipating market shifts in order to thrive in the digital age.
Merging LoveFilm with Thomas Hogue's Business
LoveFilm, under the leadership of Simon Calver, merged with Thomas Hogue's business, creating a single company in the middle of 2006. The process was complicated by egos and disagreements over the brand. Thomas, a Norwegian entrepreneur who named the LoveFilm business, was adamant about preserving his brand and having a say in the top team. Despite the challenges, the merger was eventually accomplished, with Thomas benefiting from the deal and securing one of the best deals out of the whole process.
Lessons Learned and Challenges Faced
Throughout the merger process, various lessons were learned and challenges were faced. The importance of liquidity and secondary or liquidity options for shareholders became evident, as the board's refusal to consider such options impacted the outcome. Cash and cash management also played a crucial role, with a deeper understanding of how the business generated cash leading to cost savings and eliminating the need for additional funding rounds. The complex deal also highlighted the importance of office location, with contentious discussions around headquarters and warehouse locations. Overall, the experience showcased the complexity and challenges inherent in M&A deals.
You may know that LoveFilm became Amazon Prime Video, that part of the deal was public knowledge. What you may not be familiar with is the wrangling, the deal making and the allegiance swapping that went on behind the scenes to get the deal across the table.
In this very special live episode of Secret Leaders we once again sit down with serial entrepreneur and angel investor, best known for creating Lovefilm and being an early investor in Secret Escapes, ‘the subscription guy’ William Reeve and VC Jedi, Simon Cook, to discuss the ins and outs of one of the most complicated business sales in recent history - when LoveFilm sold to Amazon.
Because this deal wasn’t straightforward in the slightest. A series of unusual mergers, buyouts, disputes and much more led to this being one of the more complicated deals of both their lives.
In fact, the only way to explain how convulated the deal was, is by comparing it to the plot of Game of Thrones. Simon was the VC on the board throughout the whole deal and Will was the founder of LoveFilm, yet neither of them are 100% clear on what went down.
It’s very rare to hear such insights from such a high profile sale, so grab a notebook and pen and learn what it takes to not just grow a subscription business, but how to sell it to a behemoth like Amazon.
“They [Amazon] could see we were winning. They said ‘we do not believe in being a loser in anything we do. We'd much rather have a small piece of the winner, than a big piece in the loser.’ And that was their indication they'd much rather sell to us than compete with us.”
We chat about:
Building up LoveFilm and plonking flags in Europe
Why competition drives business forward and sparks innovation
Why they teamed up with Amazon to defeat Netflix
Lessons learned - venture debt, paying attention to working capital and why raising venture capital is the worst thing a business can do
