iTunes rides web video rental wave

Apple's launch of iTunes video rentals has prompted analysts to suggest that the rental business model will dominate US consumption of online movies in the short term.

Overall online pay video streams for downloads will grow from 215 million in 2008 to over 2.4 billion in 2012, and rentals will account for approximately half of these sales, according to ABI Research.

"The opening up of video rental on iTunes is not surprising, given that this is how most consumers looking for legal paid movie downloads will choose to acquire them," said ABI director Michael Wolf.

"Distribution offerings for movies in attractive release windows, and that offer easy viewing on a TV or portable screen, will see the greatest success."

However, Wolf added that challenges still remain for this market, particularly competition from legacy video-on-demand services as well as " unattractive" ownership and rental terms offered by film studios for online movies.

Cable and IPTV service providers are offering "impressive" video-on-demand libraries to consumers through traditional pay video services.

"Studios are locked into the same 24-hour 'once-started' viewing window and similar pricing for all online rental partners," said Wolf.

"We believe that over time they will begin to offer greater flexibility, in particular as DVD and other physical media continue to mature and new consumer internet-to-TV hardware expands their audience of consumers."