By Philip Elmer-DeWitt
February 7, 2011

Despite fierce competition, iTunes commanded a 64% share of the (legal) market in 2010

The online movie market may be Apple’s AAPL to lose, but it hasn’t lost it yet.

According to an IHS Screen Digest report issued Monday by iSuppli, the iTunes Store’s share of the U.S. market for downloaded movies (see below re streaming) fell nearly 10 points last year, from 74.4% in 2009 to 64.5% in 2010.

But as IHS sees the market, things could have been a lot worse for Apple.

“The iTunes online store showed remarkable competitive resilience last year, staving off a growing field of tough challengers while keeping pace with an dramatic expansion for the overall market,” said IHS researcher Arash Amel.

Thanks to the iPad and the new Apple TV, Apple managed to grow its video business, according to Amel, despite “serious competition” from Microsoft’s MSFT Zune Video, Sony’s SNE PlayStation Store, Amazon AMZN and — “most significantly” — Wal-Mart WMT .

“We expect that in the United States,” he concluded, “Apple’s strong performance in iVOD will allow it to continue to bypass the video on demand services offered by many major cable operators.”

That would include Time Warner Cable TWC , which was spun off from Time Warner TWX , Fortune‘s parent company, in 2009.

CORRECTION: An earlier version of this story reported that IHS’s chart included streamed movies, like the kind Netflix NTFX offers. It does not.

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[Follow Philip Elmer-DeWitt on Twitter @philiped]

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