Unprecedented demand for movies is fuelling a boom in sales and rentals of DVD "packaged goods" across Europe.

A report released today by In-Stat claimed that locally produced content represents the fastest growing DVD segment in Europe's five largest countries, but Hollywood studios are also reporting strong movie DVD sales growth.

The value of DVD sales and rental markets in the five major European markets was about $9.3bn during 2004, and the analyst predicts this will grow to nearly $17bn in 2009.

The market research firm noted that consumers in the UK, Germany, France, Italy and Spain are migrating from traditional analog broadcasting to digital pay-TV services, but predicts that free-to-air digital terrestrial services such as Freeview in the UK will show the strongest growth rates.

The number of households receiving digital terrestrial services in these markets is expected to jump from 4.9 million in 2004 to 23.7 million in 2009.

"New digital delivery services such as digital terrestrial and IP-TV are not likely to supplant the DVD business, but rather bring digital entertainment to people by adding either convenience, mobility or improved accessibility," said In-Stat analyst Gerry Kaufhold.

Growth of cable TV is expected to be flat to slightly negative across Europe, while subscriptions to satellite TV services will pick up slightly.

In-Stat estimates that digital terrestrial will grow from about 4.1 per cent of TV households during 2004 to nearly 20 per cent by 2009.