Study: Film downloads to $1.3 billion by '11

The Western Europe and U.S. markets for movie downloads will be worth a total of $1.3 billion in 2011, according to a Screen Digest report.

Report strikes a cautionary note as it warns that the studios’ fragmented approach to digital downloads risks undermining the development of the market.

“Online Movie Strategies: Competitive Review and Market Outlook” predicts that the movie download biz, both rental and retail, will annually generate $572 million in Western Europe and $720 million in the U.S. by 2011.

Overall, the study forecasts that the online digital movie market will represent 3% of all movie home entertainment revenues in Western Europe and the U.S. four years from now.

Although smaller than some observers had predicted, this market will still be a significant one that provides incremental revenue as growth from DVD slips.

Device manufacturers such as Microsoft, Apple and Sony stand to gain from the digital movie market, but the majority of the revenue will go to the studios and other content owners — $405 million in Western Europe and $530 million in the U.S.

Hollywood will be able to command high margins as hardware manufacturers use digital downloads as a marketing tool in what’s likely to be a very competitive climate. The downside is that the lack of a single model for downloads will hinder growth for the studios.

“How the studios react is crucial,” said report author Arash Amel. “It’s a delicate balancing act between maintaining their relationships with their highly important DVD customer base — the powerful retailers like Wal-Mart and Tesco — while meeting growing consumer demand for immediate online downloads.”

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