On-demand media could generate revenues of $1.1bn by 2012 in the US and Europe, according to a new report from Screen Digest.

That will include $665m of new revenue and the rest replacement for DVD spending.

Screen Digest noted that the on-demand market 'has the potential not only to revolutionise how consumers buy DVDs but also to generate incremental revenue at a time when overall growth in DVD spending has slowed.'

On-demand has the potential to help retailers avoid the shelf space problem and let consumers and rights holders use the long tail theory to see a greater mix of content in the marketplace.

Screen Digest predicts that on-demand services will generate $33m in incremental spending this year in the US and major European markets.