U.S. video rental spending is well off its 2001 peak of $10.3 billion, but revenue from online subscriptions is beginning to put some steam back into the rental industry, according to Adams Media Research (AMR). AMR projects online subscription spending to increase by 41% to $1.9 billion in 2007.

‚ÄúThe five-year decline in the video rental market will finally end in 2007,‚Äù said AMR Senior Analyst Eric Wiener, ‚Äúdue, in part, to an acceleration in the growth of online subscription rental fueled by consumer interest in Blockbuster’s Total Access program.”

“It’s a rare 20-year-old business that gets a chance to reinvent itself the way video rental has through online subscription services,” said AMR president Tom Adams, “but the appeal to the consumer of unlimited rentals with no late fees is now clear.”

In addition to short-term competition from Internet offerings, the traditional video rental industry faces long-term competition from Internet movie downloads for devices like Apple TV and from the growth of video podcasting and Internet video.

Netflix rules the online subscription rental business with 75% of the market as of year-end 2006, but Blockbuster’s Total Access program is coming on strong – adding 800,000 new subscribers in the first quarter of 2007, the first time it has exceeded Netflix’s quarterly growth. The two leading services combined added a total of 1.3 million new subscribers in the first quarter.

AMR projects online subscription spending to increase by 68% between 2007 and 2011, rising to $3.2 billion, or about 37.5% of the total video rental market. “Video rental is still the U.S. consumer’s favorite way to see movies, with 2.5 billion rented in 2006,” Adams noted, “and the online subscription model positions the overall rental business well for the coming showdown with electronic movie downloads from the Internet.”