UKmail-order DVD rental firms Video Island and ScreenSelect are to merge,creating what they claim will be the clear leader in the emerging marketsector.
Thecompany will be headed by Saul Klein, currently CEO of Video Island, whileWilliam Reeve and Alex Chesterman, founders of ScreenSelect, will take on theroles of Chief Operating Officer and Chief Commercial Officer respectively.
The pairsay that they expect to ship over 300,000 rentals in September, equivalent toover 70 high street rental stores, and forecast that the figure will treble inthe next 12 months.
Themerged company will be "significantly bigger than Blockbuster's online rentalservice," according to a company statement and puts it in a good position tocompete with Netflix, the US firm that pioneered the DVD subscription rentalmarket, when it makes its expected entry into the UK.
The VideoIsland and ScreenSelect businesses appear to be complementary. Screen Selectwill be maintained as the consumer brand, while Video Island, which providesthe same operation as a "turn-key" or "white label" service for other retailersseeking to offer DVD rental services, will be maintained as a wholesaler. Itrecently launched DVD rental services for groups including Tesco, MSN,electrical goods retails Comet and Toys 'R' Us.
Kleinsaid: "The combination of ScreenSelect's excellent service and team alongsideVideo Island's platform, studio relationships and strong venture capitalbacking, creates the undisputed number one in the UK market and accelerates ourshared vision of expanding the market for online DVD rentals."
Mailorder DVD rental works by charging a flat monthly fee - $28.25 (£14.99) in thecase of ScreenSelect - which givessubscribers the right to watch as many DVDs as they want. Subscribers have arevolving library of three DVDs at any one time, which they can exchange asoften as they wish. The subscription system also eliminates late fees.
Netflix,which was set up four years ago has two million subscribers in the US and untilrecently was a Wall Street darling. Earlier this month it warned that its breakneckgrowth rate will be slowed by the rising cost of acquiring additional new subscribers andgrowing competition. Blockbuster, whichoperates over 4,000 conventional stores and is the world's largest video rentalgroup, has launched an online service that is $2 a month cheaper than Netflixand is integrated with the stores operation.
AlthoughNetflix has not confirmed the details of its foray into the UK, video marketsources say that it has earmarked some $3.6m (£2m) for marketing and launchcosts. That compares with the $10.7m (£6m) of second round funding that VideoIsland secured in June from investors Cazenove Private Equity, BenchmarkCapital and Index Ventures.