Instant gratification has a new name. It has several, actually. CinemaNOW. Amazon Unbox. AppleTV. Netflix Watch Now. These products and services are at the forefront of a budding legal Internet-delivered movie industry, which will reach $5.8 billion in revenues by 2011, according to a new report by Adams Media Research.

Video downloads alone will account for $4.1 billion in the US.

Although movie revenues still depend on making films people want to see, downloading is likely to help. Annual Hollywood box office revenues have averaged about $9 billion in each of the past five years, according to the Motion Picture Association of America. Another $4 billion a year would mean a giant leap for the industry.

Although the growth of movie downloading raises questions about the future of physical video stores, eMarketer believes that online rentals of physical DVDs will not be seriously impacted by the emergence of digital movie downloads for at least five years. The industry’s overall home entertainment revenue picture looks good.

AMR’s analysis points to a period of experimentation from 2007 to 2009, during which an ad-supported model will predominate. But as significant numbers of homes connect their TVs to the Internet, consumer spending on downloaded movies and TV shows should expand rapidly and exceed ad spending substantially by 2011.

eMarketer’s own estimates for movie downloading are less exuberant, with online TV outpacing movie downloads through 2010.

Although movie downloading is likely a winning proposition regardless, the more conservative numbers recognize several barriers to growth.

As eMarketer senior analyst Ben Macklin notes, "Downloading a digital single or album or even a single TV episode is one thing, but downloading a full-length feature film is another.

"The important element in the success of the iTunes model is the ease of use and immediacy of receiving the product," Mr. Macklin added. "It is actually more convenient than going to a physical store and buying a CD.

"But the value proposition for movies is not quite the same. Apart from the fact that it may take hours to download a movie, the quality is unlikely to match a DVD, and the fact that a user has to watch it on a PC is not attractive to most people."

That said, it is still early days, and if users are able to burn downloaded movies onto DVDs or somehow easily link the PC to the TV, then the online movie sector will open up.

Via eMarketer