More than half of the United Kingdom's video rental transactions and rental spending will be delivered via Netflix-style online services by 2009, according to a new report from analysts Screen Digest.


LONDON (The Hollywood Reporter) -- More than half of the United Kingdom's video rental transactions and rental spending will be delivered via Netflix-style online services by 2009, according to a new report from analysts Screen Digest.

The report, "The Outlook for Online DVD Rental," predicts that a similar pattern will emerge across Europe, with more than 40% of transactions in Germany taking place online in the same time frame. By comparison, Screen Digest suggested that slightly more than 25% of U.S. rentals would come from online services by 2009.

Screen Digest said the online DVD rental market currently has nearly 5.5 million subscribers in the U.S. and 0.85 million in Europe, where the U.K. is the dominant market and accounts for almost 40% of European subscribers. Some 10% of U.K. rentals are now in the hands of rentals-by-post operators. Overall the market will generate more than $1 billion in consumer spending.

In terms of rentals, Screen Digest said that almost 45 million DVDs will be delivered to online subscribers in Europe in 2005, while more than 381 million will be sent to mailboxes in the U.S.

By 2009, Europe will have 4 million subscribers to online rental services, of which 1.5 million will be in the U.K. The U.S. will have more than 12 million.

The report went on to suggest that the rentals-by-post business would be ideally suited to the emergence of Video On Demand, unlike traditional bricks-and-mortar rental stores.

"Looking to the future, online rental businesses may be in a stronger position than many to adapt to the rise of VOD as a commercial reality, benefiting from a loyal customer base that is Internet literate and willing to pay for filmed entertainment for home viewing," the report said.

The report's conclusion comes as U.K.-based online rental company LOVEFiLM is set to launch a £2.99 ($5.2) rental download service this week and has signed up "more than five major suppliers" to support the project, according to CEO Mark Livingstone.

The move follows the September launch of a free download service for short films that tested the system architecture.

The new service, however, will form part of a new "pay-as-you-go" operation that will charge £2.99 for a five-day rental period, for either a DVD or a new release or catalog download. The new service will operate in the same pay-per-view window as other VOD operators such as pay TV operator BSkyB.

"We think it will be incremental to our subscription offer," Livingstone said, "and we will be offering both current titles and those that have been deleted and are not available on DVD."

Livingstone added that LOVEFiLM is targeting 1 million downloads by Christmas 2006.