Amazon is to bow out of DVD rentals and throw its weight behind Lovefilm, the leading European specialist,. Amazon is to transfer its subscribers and inject some cash to Lovefilm in exchange for a stake believed to be about 30 per cent of the company and valued at about £60 million (E80m) to £70 million.

Simon Calver, chief executive of Lovefilm, said the arrival of Amazon as the single biggest shareholder did not mean an end to plans for an eventual initial public offering or buy-out of the business. “This puts those options more firmly on the table than before,” he said. Lovefilm, which hired Goldman Sachs in December 2006 to explore its strategic options, is backed by Arts Alliance Media, Index Ventures, Balderton Capital and DFJ Esprit.

Amazon will offer Lovefilm's rental service via its own websites in the UK and Germany and provide marketing support. Lovefilm had boasted 600,000 subscribers before announcement of the deal, which will see the customer base rise to 900,000.

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