"The PC industry is champing at the bit to provide downloaded movies that might compete with DVD sales, and pay-TV services want to add movies to their video-on-demand services, to their new disk-drive-equipped set-top boxes, and to their emerging high-definition TV services," said Gerry Kaufhold, an In-Stat analyst and author of the report.
DVD sales growth is slowing, according to several recent reports. A study released by Adams Media Research in October forecast DVD sales of about $17.3 billion this year, a 12 percent rise from 2004. Adams forecast a 9 percent rise to $18.9 billion in 2006.
The industry also is grappling with a scuffle over what technology will underpin the new wave of high-definition DVDs, the report said.
"The migration to next-generation high-definition optical disc formats is not going smoothly," Kaufhold said.
On one side is Sony with itsand studio supporters such as Metro-Goldwyn-Mayer and Fox Filmed Entertainment. The , championed by a group of consumer electronics companies including Toshiba.