Volkswagen is the first sponsor of the service, enabling it to place an ad at the beginning and end of the 'The Cooler', a Las Vegas-set film starring William H Macy and Alec Baldwin. The car manufacturer is funding 100,000 downloads, and several other major sponsors are reportedly in the pipeline.
Volkswagen branding will appear across the website and an ad will be streamed to the consumer's desktop while the film is downloading.
The free films are available to subscribers and visitors, who just need to provide an email address and password.
Chris Bird, head of marketing services for , said: "The model allows brands to deliver campaigns that combine the impact of cinema and TV advertising, but through the accountability of the web."
In addition, Lovefilm is introducing a service in early April allowing consumers to download movies and burn them to a blank DVD, starting at £9.99. All DVDs will feature copyright protection and consumers can initially choose from a bank of 100 titles.
Sony is backing the download-to-burn service, alongside several other as yet unnamed film studios. Simon Calver, CEO of Lovefilm.com said: "Download-to-burn is the next step in the evolution of movie purchasing and viewing."
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