Entertainment One

ADD

14/07/2011 Ben Jaglom

Media group Entertainment One (ETO) has signed a deal with video games and film rental company LOVEFiLM to distribute its films.

The five year contract - for an undisclosed amount gives LOVEFILM (now owned by Amazon following a deal worth circa £200m earlier this year) all pay TV rights for Entertainment One's UK film releases, with the deal applying to LOVEFiLM's online service. Previously all pay TV deals were signed by BSkyB for use on its film and box office channels. The deal is estimated to be worth approximately £5m per year.

Speaking to Growth Company Investor chief financial officer Giles Willits enthused that the deal is 'historic' as it represents LOVEFiLM moving into an area 'that has traditionally been the sole domain of Sky.' He adds that it is the 'first time that you have a digital provider saying that they will give you exclusive rights in return for paying for it'.

Analysts at Singer Capital Markets have put their forecasts under review. Prior to the announcement it was predicting £38.2m in pre-tax profits (EPS: 13.5p) for the year to March 2012 on sales of £504.2m.

Last recommended by Growth Company Investor at 152.5p this May, the shares have since gained more than 25%. The latest deal with LOVEFiLM offers both recurring revenue and bolsters the groups prospects further. We therefore upgrade the shares from hold to add.