According to the firm's study, the market for movies on the web will generate US$37.25 million in 2006 in the U.S. -- a mere .15 percent of the domestic home video rental and sell-through market for 2005. The total number of full-length motion picture units sold (either via rental or download-to-own) over the Internet could total 9.5 million, barely one percent when compared to the 1.34 billion DVDs and videocassettes sold in 2005. Placed in context, the $37.25 million in web-based movie distribution revenue is less than the 2005 domestic box office revenue for independent film hit Napoleon Dynamite, which generated $44.5 million in ticket sales that year.

The sale and rental of movies over the Internet will grow dramatically over the coming years and could reach nearly 60 million (59.4 million) units by 2010, with revenues skyrocketing to over a half billion dollars ($534 million). However, even with this growth, Internet movie sales and rentals will still represent a tiny portion of the motion picture industry's revenues. The $534 million in 2010 represents only two percent of the home video rental and sales revenue generated by the motion picture business in 2005. The 59.4 million units still represents only four percent of the total home video units sold in 2005.

Research and Markets says that the single biggest factor holding back Internet movie sales is Hollywood's reluctance to allow films to be sold over the web so that they can ultimately be viewed on TVs. Although technologies exist today that allow for the transfer of web-distributed films to traditional TV sets, these technologies are too complex for most consumers. Other technologies that allow for a smoother transition of movies to TV sets are still too new and have yet to gain traction in the marketplace. I'd be surprised if Apple doesn't have something up its sleeves regarding this.

Research and Markets also expects the same, forecasting a rosy future for the company in movies and TV show downloads. "Apple’s forays into the Television 2.0 arena have produced remarkable results to date, and promise to generate for Apple as much, and in all probability far more, revenue than Apple’s successful iTunes digital music business," the research firm says.