Analysts are predicting a rosy future for music and video retailers, despite statistics showing the market has shrunk in 2007.

Datamonitor's Verdict Research, which carried out today's study, says that music and video retailers can expect to see a tightening of three per cent in their annual returns this year.

But it predicts that the prospects for specialists who survived the collapse of Music Zone and Fopp are "brighter" than in previous years.

"While piracy will continue and CD volumes will decline further, retailers generally are now better placed to cope with new market challenges," said Verdict's lead analyst Nick Gladding.

Mr Gladding's report says that next-generation HD DVD technology will have a 'stabilising' effect on The Music and video market.

He acknowledges however that while providing a "much-needed stimulus", it will not provide a boost comparable to the initial advent of DVDs.

Verdict's data shows that digital downloading may deliver a similar fillip though, with online sales forecast to increase by 45.5 per cent this year to £163 million.

12/10/2007 00:01:00