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European market will trail music for some time

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Analysis Movie downloading in Europe is set to grow but not as quickly some would like

Screen Digest believes that the market for movie downloads will be worth £60m in the UK and €250m in Europe as a whole by 2010. This is considerably smaller than the market for music downloads, which are forecast to reach €900m by 2010.

A recent article by Rethink Research's Faultline has suggested that the market for movie downloads would follow an almost identical pattern to that of music and reach $1.2bn by 2010.

For good reason, Screen Digest believes that the model for music downloads cannot be applied so simplistically to that of movies. Our thinking is as follows:

The European movie downloads market will be worth just €2.7m in 2005. Several services are currently in operation - mainly in Germany, France, Italy and the Nordics. All have had similar downbeat experiences to both Movielink and CinemaNow in the US, where sales have been very slow despite the availability of premium content.

In the UK, not only is there at present no single movie download service offering premium content, but of the several UK services expected to still launch in 2005, only one has a direct paid-for business model. Importantly, the key services that will drive the market, such as Sky Movies Broadband, will be primarily made available free of charge to existing customers for subscriber retention purposes and as such bear no immediate direct incremental revenue generating potential.

The growth model of iTunes in the music sector cannot be applied simplistically to the complex business model of film, nor can the sale of small music files be placed on a par with sale of movie files which are in excess of 500Mb in size and are predominantly for exploitation in the 'lean-back' environment of the living room.

At present, no hardware plus software model (like the iPod plus iTunes model) is in place for feature films, nor is one expected to appear in the medium term. There is currently a reticence to encourage a single dominant retailer, but instead to foster healthy competition amongst a variety service providers.

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