Lovefilm operates in the U.K., Germany, Sweden, Norway and Denmark. Much like Netflix Inc., it is a subscription-based service through which people can rent movies by mail or watch them on a computer by streaming them over the Internet. The company also offers TV shows and games.
Amazon.com Inc. already has an on-demand service that lets people rent movies by streaming. However, it does not send movies in the mail, as Lovefilm and Netflix do.
Netflix doesn't currently operate in Europe. Having a strong rival could make it difficult to expand there.
Netflix's stock is down $4.96, or 2.6 percent, to $185.91 in morning trading Thursday, when Amazon announced the deal.
Terms of the purchase were not disclosed.