Don't think they'll gain much market if they keep it this way. Lovefilm is £10, which is a bit more than Netflix (£6), but their collection is infinitely better.
The functionality is really bad too. I'm not sure if that's Sony or LoveFilm, but the way films are categorised has nothing to do with the actual film.
I signed up for the month free trial and they were advertising The Matrix to give you an example of how little there is to choose from.
There are more modern films but you have to pay extra for them.