Published: Jan 20, 2011 7:47 PM EST
Updated: Jan 20, 2011 4:47 PM EST

NEW YORK (AP) - Amazon is buying Lovefilm, a European movie rental service akin to Netflix.

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. 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.