Netflix enters UK video on demand market with tempting deals

US digital film business Netflix will this week launch an ad campaign and a string of new film and TV deals, provoking scramble for subscribers against rivals such as Amazon's LoveFilm.

Netflix is understood to be close to revealing streaming ventures with film and TV companies including Sony, Disney, Paramount, Channel 4 and ITV to boost the allure of its UK launch.

Netflix, which has announced a number of deals already has contracts with broadcasters and film studios – from the BBC, Miramax, Lionsgate, MGM – with titles including Pulp Fiction, Kick-Ass, Top Gear and Doctor Who, available to rent.

The company has revolutionised the way Americans watch films – Netflix notched up more than 20 million US subscribers since launching an online streaming service in 2007 – but it is set to have a much tougher time in the UK – facing rivals including Rupert Murdoch's BSkyB, Google-owned YouTube and Tesco's Blinkbox service.

In October Reed Hastings, the Netflix chief executive, warned investors of the scale of the task admitting that the venture is expected to take more than two years to achieve profitability in Britain, longer than in previous launch markets such as Canada.

Hastings' warning was responsible in part for the shares in the one-time internet darling plunging 27%.

"We'll know more after our first two quarters," he cautiously noted. The challenge is such that Netflix moved to completely halt its international expansion strategy until it could firmly establish an "aggressively priced, compelling service" in the UK.

Netflix's share price received a much-needed fillip last week when investors were buoyed by better-than-expected figures showing that it had surpassed 2bn hours of streamed content to its US subscribers in the fourth quarter.

Direct rival Lovefilm has attempted to contest Netflix's entry to the market by ramping up its streaming contracts.

Lovefilm has agreements with partners including ITV, BBC, Warner Bros, Entertainment One, Sony and Studio Canal for titles that include vampire franchise Twilight Saga, Tinker, Tailor, Soldier, Spy and Facebook movie The Social Network.

The UK online TV and movie market – worth £11m five years ago – is booming and is expected to surge by 35% next year to £379m, according to Screen Digest.