The LOVEFiLM story: Simon Calver on how the UK start-up became an Amazon giant

It's been an eventful year for DVD-rental company LOVEFiLM. Bought out by Amazon in January, the company recently launched an iPad app, struck an exclusive deal with StudioCanal and added XBOX to its list of devices customers can subscribe to.

 

Speaking to BusinessZone.co.uk at the Sage World conference, Calver explains: "There are three key things that are really important for our customers and they are having the right range, the right value and the right convenience. In the early days, when we had just 5,000 customers, we called them the 'holy trinity' of what we were trying to do as a brand.”

 

Calver, who became CEO in 2005 when LOVEFiLM was just a start-up, explains, "Word of mouth was absolutely the most critical thing that we had for growing our business. And the only reason why we were able to get the momentum behind that word of mouth was because we became absolutely tyrannical in ensuring every customer experience was the best possible experience that they had."

 

The growth of social networks saw customers take word of mouth online. Calver explains why monitoring the company's online reputation quickly formulated an important part of its PR strategy: "If you're not monitoring it then you need to be because people are talking about you and you don’t know about it.

 

"You have to invest in having people monitor it but also use it yourself. Don't sit there and say that social media's all very interesting but somebody else is using it. Get involved and see how it can be used and learn from it."

 

The once Dell executive hasn't always got it right with technology, however. He terms his decision in 2005 to launch a download service, rather than stream content, as an "absolute disaster".

 

"We got it wrong, we picked the wrong technology," he says. "We had an app which you downloaded onto your computer first and in half the cases, this didn't work properly. For 10 people who watched a film, three or four of them would call our customer services to report problems. We leant from that and pulled back all of our download services and re-launched as a streaming service in 2008."

 

Calver merged Video Island and Select Screen to create LOVEFiLM International in 2006, becoming the largest DVD rental company in Europe. Two years later, the company expanded even further when it bought Amazon's DVD rental service and saw the retail giant become the company's largest shareholder. In a year when many small businesses struggled to survive the recession, 2008 became LOVEFiLM's strongest period.

 

Calver cherry-picked an innovative technology team of 60 in 2009 to expand the business' technology services. Simultaneously, Amazon began to cement its stake in the technology market following the Kindle launch in 2007, and started showing interest in the company. Calver was finally approached with the offer of becoming part of the Amazon family following what he describes as a "long process", and in January LOVEFiLM became wholly owned by Amazon for a reported £200m.

 

"We clearly built ourselves as a technologically-leading company but to take it to mass market in many markets was going to be a big challenge for us. Amazon had that same vision and desire that we had, so it made sense", he explains

 

Describing the six years it took to cultivate the partnership between the two companies from their first meet in 2005, Calver divulges some advice to entrepreneurs looking to do the same: "If there are two or three people you think you're going to partner with, pick them early and develop your relationship.

 

"It's important to sell it to the person you believe in if you're planning on selling your company and staying in the business. Don't necessarily sell it to the highest bidder. If they're strategically not aligned with what you want to do with the business, then don't do it.

 

"Also, don't do it too soon. There were other opportunities we could have had in the lifetime of our company but it was better to do that later when we built that unique technology where we were differentiated, where we brought the brand and we had more scale.

 

"It's easy to try and think you can leave early if something's half attractive, but pick your time, ride your curve when you want to get to the next level and make sure you’re doing it for the right reasons. If it's going well and you're having fun, stick with it and enjoy it and see how big you can become.”

 

Choosing to partner with Amazon’s Jeff Bezos wasn't a hard decision for the LOVEFiLM CEO. As the owner of a $30bn company and a businessman who adds a FTSE100 firm on top of Amazon every year, Bezos is an entrepreneur who has always inspired Calver.

 

"What I really like is an entrepreneur who not only executes well and delivers and does what they need to do, but also redefine markets," he says. "For example, the way Michael Dell redefined the computer industry in the early days was inspirational. He was single-minded and focused. Look at the late Steve Jobs, he innovated and adapted and changed and always tried to get the best he possibly could."

 

Despite LOVEFiLM's strong position within the rental market the company still faces threat from competitors. Earlier this month YouTube launched its film rental service, offering the same services at exactly the same prices.

 

"It's always a big challenge when you come against the really big companies in the market," Calver admits. "The user experience has to be best, the content that we have has to be best, and the service has to be seamless and easy to use. Ultimately it's not Facebook or Google who decide the end goal, it's your customers. So stay close to them and ensure you're offering a really competitive service out there."

 

There is no doubt LOVEFiLM's expansion onto various online platforms is formulating a digital future. Asked if the company will ever disband its original postal operations and become a solely digital organisation, Calver replied: "In time that's inevitable, although it’s years and years away yet."

 

For the meantime, Calver ends with a nod to expanding existing markets as well as new European markets. An Amazon-owned company, LOVEFiLM may pride itself on 75m customers, but as Calver concludes, "We've only just begun."