Amazon takes full control of Lovefilm

Girl with the Dragon tattoo ... one of the films are available for Lovefilms subscribers to stream online

Amazon took today full control DVD rental and online video company Lovefilm, in a deal to buy at 58% of the company, as it does not already own a released sum.

The world's largest online retailer has adjust to bid for a full stake in Lovefilm for some time, and today's deal is believed to value the business at around £ 200 m.

Amazon bought a 42% stake in Lovefilm in 2008.

"Lovefilm has to innovate on behalf of the movie rental customers across Europe for many years and with the advent of Lovefilm player, they are further delighting customers by streaming digital movies to their immediate enjoyment," said Amazon's Vice-President of European retail, Greg Greeley. "Lovefilm and Amazon have had a strong working relationship since Lovefilm acquired Amazon Europe's DVD rental business in 2008, and we look forward to a productive and innovative future."

LOVEFiLM will remain a leading player in DVD rentals since the launch in the United Kingdom in 2004, and has 1.4 million subscribers across Europe. The company tripled its sales in 2009 to almost £ 100 million, and in March last year launched its digital streaming service, enabling viewers to Rent and watch movies over the Internet.

The acquisition will be subject to European regulatory approvals and is expected to close in the first quarter of 2011.

Lovefilm chief executive, Simon Calver, said: "deal is a win for the members who love Lovefilm because of its value, choice, convenience and innovation in home entertainment

"With Amazon's unequivocal support we can significantly improve our members experience throughout Europe."

Within the last 12 months, Lovefilm has stepped up its movie streaming business, while leaving service its physical DVD rental continues its growth. Lovefilm announced in 2009 that online now was its "primary" company – despite online rentals, representing a 10th of DVD and Blu-ray rentals.

LOVEFiLM customers can now also stream movies over a number of internet-connected living room devices, including Sony and Samsung TV sets and PS3 games console.

Takeover bids conversations between companies means rushed when Lovefilm was reported to be approaching a public offering. Investers in Lovefilm include European venture capital firms DFJ Esprit, Balderton capital, Arts Alliance Media and Index Ventures.

Dharmarsh Mistry, a partner at the Balderdon capital, said today the acquisition was "great" for both companies. "Lovefilm is Netflix Europe, and it will be central to Amazon's European and global strategy."

Rise and rise of us movie rentals fixed Netflix, which have a market capital of $ 9.97bn (£ 6.23bn) – believed to be another leading cause of Amazon's Move. Netflix announced its intention to expand globally, with Europe and the United Kingdom a natural next step. Netflixs film library is believed to be nearly twice the size of Lovefilm 's.

LOVEFiLM was formed by the merger of two European DVD rental businesses, Arts Alliance Media and Video Island, in 2006. Two years later, privately owned Lovefilm acquired Amazon in UK and German movie rental business, with online retail giant takes a stake in the business world as a part of the deal.

The company now operates in five European countries: UK, Germany, Sweden, Denmark and Norway.

Saul Klein, a partner at Index Ventures and co-founder of Video Island, said process opens the door for a series of "mouthwatering Palatinate" integration opportunities with Amazon's existing assets, including movie database IMDB.

"When you get to the level of activity as a Lovefilm — makes £ 100 m in revenue, profitable and growing, not only in the United Kingdom – you end up having a lot of [future business] elections," said Klein.

"Amazon, will be one of the best ecommerce companies in the world has an incredible platform, including IMDB take Lovefilm to the next level and accelerate its growth.

"The great thing about Lovefilm is, it has been a stable and growing core activities in DVD by post, and, however, quickly [internet] streaming arrives, most people would say, there is still a pretty good long-term business in sending people DVDs through the mail."

"It is the customers, who shall decide on the go to digital or physical rentals – that's why we develop a hybrid proposition" Calver told the guardian. "We see no change in our strategy or approach, the basic things will accelerate growth. There are plenty of opportunities, but it is still early days, so there is no concrete plans and both companies see opportunities. "

Calver said, Lovefilm has seen "very, very strong" dissemination in streaming from video game consoles, which it introduced in March last year, but to physical rentals was also performing "safely" and "continued at pace".

Amazon's initial plans for Lovefilm is to continue to expand its presence on the internet-connected devices Greeley said, with Lovefilms European base complement Amazon's existing only U.S.-video on demand (VOD) offering.

Physical DVD rentals will remain an important part of the Lovefilms service under its new owner, he told the guardian: "as long as we offer a service across three fronts [streaming via game consoles, and internet rentals physical view], we are not concerned about cannibalisation."

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Kinect hackers control operation

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A collection of Kinect hacks, including air guitar, animated puppets and a virtual piano

Christopher Baker spent Boxing Day as a VJ – video jockey – for a warehouse party in Liverpool. Among the items being used was a Microsoft Kinect controller, normally used to play Xbox 360 games such as Kinectimals or Kinect Sports. But Baker wasn't playing games: the system was rigged up to a computer running software to interpret the movement data being gathered by the system. The software Baker had written monitored how the clubbers were moving and used that to affect the sound, creating a feedback loop between dancers and sound. "It was popular with the clubbers because they could interact directly with the sound and were immersed in the experience," he says.

Baker, who works at Apposing, a mobile app development company based in Liverpool, is one among hundreds of people who have embraced the Kinect not for its potential in gaming (though that is substantial), but because, unusually for an Xbox accessory, its outputs can be put to different – and in some cases revolutionary – uses. In fact, the Kinect may turn out to be the device that ushers in an age of smart machines that can be rigged together and react to humans in useful ways.

Even on its own, the Kinect is an impressive piece of technology. As Microsoft's tagline goes: "You are the controller." It uses an infrared sensor with cameras to sense the movements of players in front of it. Stand in front of a Kinect linked to an Xbox 360, wave your hand and a hand icon on the screen moves too. Start playing a game and it will know if you've jumped for a spike shot in beach volleyball, hit a topspin or slice shot in table tennis or thrown a jab in boxing. No wires, nothing – the machine knows. It's an experience that is at first strange and then exhilarating.

This has made the £130 Kinect an incredible success story. It has sold 8 million units worldwide since its release in November, making it the fastest-selling consumer electronics item ever, faster than the iPad (the previous record-holder) and its predecessor, the DVD player. There's also plenty of potential for the number to grow: 50 million Xbox 360s have been sold worldwide and the Kinect will work on every one of them. Microsoft's ambitions go beyond even that: it seems that some future PC games will be controllable by it. And there are around a billion PCs on the planet.

For Microsoft, best known for its Windows and Office products, which generate billions of dollars of profit every year, the success of Kinect will be a welcome relief. Its entertainment & devices division (E&D), which makes the Xbox, had to take a $1bn write-off to manufacturing failures of the Xbox 360 and has barely bumped along in profit while sales of the console trailed Nintendo's cheaper, simpler Wii for years. But Kinect's appearance has come as E&D's profitability has solidified, even if, at $382m in the most recent quarter, it is only a 10th of that from Windows or Office. It could, in fact, turn it into a new leg of profits for Microsoft.

The Kinect solves a problem that has troubled computing experts for years: how to give machines useful vision. Ron Forbes of Microsoft's interactive entertainment business says it needed a different approach: "We knew early on [in the Kinect's development] that we had to invent a new way of approaching this problem, one that works like the human brain does." The infrared projector and sensor incorporated into the front of the device turn the world into shades of black (far away) and white (close), which it scans at 30 frames per second and analyses to find the moving parts of the image, by comparing differences between frames. These data are fed into a system tuned to recognise parts of the human body, guessing what moving part is a hand or foot or leg and estimating the movements of each.

The data are then fitted around a schema of a 20-joint skeleton (hands, wrists, elbows, shoulders, feet, ankles, knees, hips, plus two points in the lower back, and the neck and head), allowing you and a partner to be tracked in 3D, across a range of 1 to 3.5 metres, and an angle of 57 degrees horizontally and 43 degrees vertically. The Kinect also has a microphone array so it can react to voice commands.

Games designers have built sports, fitness and dance games where gestures decide what happens, but it's the "hacks", not the games, that have people like Baker so excited. The open-source software developed to interpret Kinect output – to a standard USB plug – has already been used for dozens of projects: a team at a US university has created a miniature helicopter that flies itself and avoids obstacles; another has made a "virtual piano" on the floor (you play it with your feet); the multiplayer role-playing game World of Warcraft can now be played simply by using gestures, thanks to the University of Southern California's Institute for Creative Technologies, which has written a special software "toolkit". The institute has bigger plans for the future: medical games to help people regain the use of their limbs after a stroke, indoor exercise games and so on.

Even more impressive is the work done by a team at the Massachusetts Institute of Technology (MIT), which amplified the hand detection to recognise hands and fingers and then linked it to a program for scrolling pictures, giving something of the feeling of Minority Report, the film in which Tom Cruise waved computer files and videos around in his search for crime suspects. Watching the MIT video is eerie if you have seen the film – it's as though the future is unfolding before your eyes.

Yet at first Microsoft seemed unwilling to let people dig under the surface of its software. At the launch on 4 November, it told the news site CNet: "Microsoft does not condone the modification of its products… with Kinect, Microsoft built in numerous hardware and software safeguards designed to reduce the chances of product tampering. Microsoft will continue to make advances in these types of safeguards and work closely with law enforcement and product safety groups to keep Kinect tamper-resistant."

That didn't prevent two developers and a Google engineer putting up a $4,000 bounty for anyone who could write software that would work independently of the Xbox and so let it be used for more than just games. As they pointed out, people had done much the same with Nintendo's Wii, which uses the widely available Bluetooth communications standard, to create some interesting hacks.

Within a fortnight, Alex Kipman, the Xbox's "director of incubation", was insisting the Kinect was open by design and that Microsoft was excited about the idea of people designing new applications for it; the company seems to have initially misunderstood what sort of hacking was going on and thought that people were opening up the innards of the machine to get at its proprietary (and highly valuable) chips and software, rather than simply playing around with its output.

At that, the floodgates opened. By 14 December, there were "official" open-source drivers – the essential software that lets a computer understand what the stream of incoming data refers to – and the list of hacks is growing almost by the hour.

Baker, who has a longstanding interest in graphic design and motion graphics, is thrilled at its potential: "What would have once taken weeks of careful editing can now be generated live with software that costs the user little more than some of their own time and its patient application."

And the future? The sky's the limit, Baker suggests. "Gestural interface will change the way we use information devices for the young, old and disabled and allow interactivity to take place in locations where it would once have been impossible."

There remain plenty of new areas that the Kinect could be used in. Microsoft is still keeping its voice detection system under wraps – this seems to be done inside the Xbox 360 – which has dismayed hackers who want to get closer to it.

The most encouraging thing about the Kinect for the wider use of computing is that it is not the result of a surge in computer processing power. The Xbox 360 first appeared in late 2005 and that's "veteran" by today's computing standards. Microsoft says the processing required for Kinect takes less than 10% of the Xbox's computing power. This means that running the Kinect takes comparatively little computing power by modern standards, so its technology could be incorporated into machines of the future, which would be able to recognise us (and identify us by the distances between our joints), watch us moving around and react appropriately.

Imagine an old people's home where Kinects could spot someone falling over or someone who hadn't moved for a long time. Or perhaps a door-opening system that would react to your gestures to open it: as it recognises an individual's unique 20-joint shape, only the right person making the right gesture gets in.

The possibilities are endless. And for Microsoft, it's all profit.

The title of "fastest-selling gadget" is not easily won. Before the Kinect deservedly took the crown at the end of 2010, with 8 million sold in around 50 days, the previous holder was Apple's iPad. It went on sale last April and sold 3m units in its first 80 days, and 7.4m by the end of September, the last announced results from Apple.

But 2010 was unusual in seeing the title change not once but twice; before that it had been a long time between crownings.

In fact the previous record-holder for the title was the DVD player, which sold 350,000 units in its first year, 1996. That means twice as many Kinects were sold each week as DVDs were in an entire year.

It is difficult, however, to be absolutely certain about these technological milestones; the Guinness Book of World Records doesn't officially track sales figures, and some companies simply don't release their numbers.

And expectations for what will be the best-sellers are often dashed. In October 2007, Comet forecast that high-definition DVDs would be best-sellers. Five months later the range was discontinued – having lost out to Blu-ray.

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