Screenclick, the online DVD rental company, has been acquired by the UK's largest online DVD rental service, Lovefilm.com, in a deal which values the four year old Irish company at €3 million.

Screenclick has over 15,000 registered users and has been funded by private investors including former Smurfit Group chief financial officer Tony Ritchie.

The Dublin Business Innovation Centre also has a 12 per cent stake in the company through its seed capital fund. The founder and chief executive of Screenclick, Frank O'Grady, said that he intends to stay on at the helm of the company, which will be rebranded as Lovefilm.ie.

The company was founded in 2001 as DVDrentals.ie. The most recent annual return for DVDrentals.ie, which covers the year to last September, show that Mr O'Grady owns just under 41 per cent of the company.

The most recently available accounts state that the company had net assets of €7,060 at the end of 2004 and accumulated losses of €122,968.

The company will next month move into providing video-on-demand services.

Broadband users will be able to rent new releases online and have the film streamed directly to their PC.

The film will delete itself after seven days or when the customer finishes watching it, depending on which happens first.

Mr O'Grady said that titles will be available at the same time as they hit the shelves in retail DVD rental outlets such as Xtravision and that later in the year, Lovefilm will begin to offer set-top boxes so that movies can be viewed on customers' televisions and not just their PCs.

This will put it in direct competition with Sky. Films are typically available on DVD six weeks before they are screened on subscription television.

Screenclick allows subscribers to create a wishlist of films that they wish to see on the company's website.

These are then mailed to them in the order they become available and returned via freepost with no penalties for late returns.

Lovefilm.com is owned by Arts Alliance Media, a UK company which provides digital services to the film sector. It recently won a bid from the British Film Council to build 240 digital screens in the UK.

It is actively rolling out the Lovefilm.com brand around Europe. Last summer it acquired a controlling interest in Boxman, the second biggest company in this space in Sweden.

In October, the company used Boxman to acquire Digitarian, Denmark's largest online DVD rental company. In addition to trading under its own name, Lovefilm.com also provides DVD rental services for Lastminute.com, Film Four, CD Wow!, Sainsbury's, WH Smith and TV station Five.

Screenclick has followed a similar model here and according to Mr O'Grady, "a sizeable chunk" of its subscriber base has come from a deal with Eircom.net. It also provides rental services for Ticketmaster.ie and Lastminute.ie and will shortly be launching a service for TV3.

"We will now have more films than Xtravision and we are able to stand over that," said Mr Grady. "We will have some real muscle behind us so we can really take on Xtravision directly."

Screenclick will be upgrading all of its packages so that subscribers will receive more films each month - it will now be possible to get up to 10 films on the basic package, which costs €20 a month.

Mr O'Grady said that subscribers to the service will also be able to view film trailers on their mobile phones as well as managing their accounts from their mobile phones.