DVDs are a popular stocking filler at Christmas, but the collapse in sales of VHS cassettes means the British video industry is facing its most difficult year in a quarter of a century.

According to figures collected by the British Video Association (BVA), the value of the video market — nearly £2.7 billion in 2004 — is set to fall by 10% this year. Lavinia Carey, director-general of the association, said it would be the first significant fall in 25 years.

Slowing growth in DVD sales has not been sufficient to offset a 70% fall in the VHS market. Figures from retailers suggest the number of VHS cassettes sold will fall from 37.1m in 2004 to 11m.

“Because VHS has fallen off the cliff, the overall home entertainment market is going to be down by the end of the year,” said Carey.

DVD sales are expected to rise 10% to 220m. Carey said this growth was much slower than the 20%-30% increases seen in previous years.

Another factor is the decline in average prices, which means that a 3% fall in volume translates into an estimated 10% fall in value.

The decline in the video market comes as the entertainment industry prepares for the introduction of new digital services that will allow films and television programmes to be downloaded over high-speed internet connections. In America, Apple has already made available a limited range of television programmes, including Desperate Housewives, that can be downloaded from iTunes.