The online video market will have a retail value of more than $3.8 billion worldwide by 2011, according to Understanding & Solutions.
The research company said that although the United States had the most developed online video market so far, online video revenue for the country would only reach $280 million in 2007, accounting for 1% of the total home video market.
"By 2011 online video in the US will represent 8% of total home entertainment revenues, with Western Europe close behind at 7%," said Mai Hoang, analyst at Understanding & Solutions.
"What's more, multiple formats will coexist in the future, and no one format will control the home entertainment landscape, quite unlike the domination of DVD since the demise of VHS," Ms. Hoang said.
"The new generation of high definition video formats will also help to shore up packaged media's presence within home entertainment revenue streams," she said.