Online entertainment worldwide is expected to increase threefold in five years, driven primarily by Internet television offered by telecommunications companies, a market research firm said Friday.

Revenues from video, which includes IPTV and video on demand; music downloads, games, gambling and adult entertainment are expected to increase to $36 billion in 2009 from $12.3 billion last year, telecom analyst firm RHK said. This year, online entertainment is expected to reach $15.8 billion.

IPTV, which stands for Internet protocol TV, is expected to be the biggest driver behind the 24 percent annual growth in online entertainment, RHK analyst Josette Bonte said.

"It's very embryonic right now, but it's growing at a compound annual growth rate above 100 percent," Bonte said.

The second biggest driver will be online games that involve multiple players, Bonte said. Music, on the other hand, is not expected to contribute a lot of new revenue, primarily because prices for music subscriptions are expected to drop.

For years IPTV in the U.S. has only been available through local telephone companies in small cities and towns. More than two-dozen of these companies offer IPTV today, such as SureWest Communications in the Sacramento, Calif., area and AllWest Communications in Utah.

But that's changing. All the major telecommunications companies, including Verizon Communications, SBC Communications and BellSouth, have announced plans to roll out IPTV services in major metropolitan areas, in order to combat competition from cable companies offering Internet telephone services.

"(The telephone companies) have no choice but to go into video services," Bonte said. "Their core services are being eaten up by cable operators."

IPTV, which is more widely used in Europe and Japan, distributes television programming, movies and other services over a broadband connection that feeds into a special set-top box.

Telephone and cable companies are looking to attract customers by offering telephone, video and hi-speed data services in a package that would be less than buying the services individually. The companies could also offer wireless services as a fourth offering.

Despite this intense competition, the companies are expected to differentiate themselves more on unique content and services than on price.

"There will be a price war, but I don't think it will be dire," Bonte said. "Someone has to pay for the programming, and the price of programming is going up."

Over the next three to five years, online entertainment is expected to cut into traditional entertainment worldwide. For example, video over the Internet is expected to slowdown growth in DVD sales. Internet-delivered video-on-demand is expected to reach $7.9 billion in 2009 from $200 million in 2004, according to RHK. DVD sales, meanwhile, are projected to increase to $22 billion in 2009 from $15 billion in 2004.

In the long term, however, most of the different methods of distributing entertainment, from TV to the movie house, are expected to survive, as people tend to spend money on more than one medium.

"There's always a slight displacement, but fundamentally, there's a point of equilibrium achieved where all the various distribution mediums survive," Bonte said.