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A new report by London-based Futuresource says Blu-ray sell-through will finally beat DVD in 2014. The report also points to strong growth in digital distribution, growth that will cover the likely decline in packaged media sales.

While Blu-ray sell-throughs only accounted for 13% of the total sell-through market in 2010, Futuresource says that by 2014, it will have beaten DVDs as the primary source for disc based entertainment.

Futuresource is also predicting that despite the rise in popularity of rentals, sell-throughs will still account for 70% of all physical video spending in 2014.

But Futuresource also warned that Blu-ray's rise will not be enough to offset losses in DVDs, although they do not believe that physical video is in a terminal decline. "While packaged media is declining, it certainly isn't falling off a cliff," said Futuresource Senior Analyst Mai Hoang.

Regardless, digital will be the salvation of the industry. Futuresource predicts that by 2014, 46% of global spending will be attributed to digital media, up from 24% in 2010. While the future definitely belongs to digital, Futuresource warned that digital media still faced several serious challenges. The most serious being the availability of free content on the Internet, both the legal and illegal kind (in Western Europe, paid for online video only accounted for 2% of total video spending). 

Most importantly, Futuresource urges the industry to improve the online experience for viewers. "For digital, the online user experience needs to be as seamless and enjoyable as possible for the video industry to maximise the future opportunities and make this revenue stream really perform," Hoang added.