Music downloads set to outpace sales of physical media by next year

Healthy growth in the online music market will continue for the rest of the decade, with worldwide sales growing from $1.5bn in 2005 to $10.7bn in 2010, market watchers have predicted.

According to In-Stat, revenue from downloaded music will outpace revenue from physical media bought online by 2007.

The analyst firm believes that this trend highlights the importance of the internet as a key distribution channel for legitimate digital music sales. It also noted that the mobile phone is evolving into an important channel for digital music.

"Consumers are clearly opting for legal ways to purchase music, and more legitimate music sites are available," said In-Stat analyst Stephanie Guza.

"But vendors still face significant obstacles such as internet piracy, interoperability concerns and the unlicensed use of digital streams."

The In-Stat survey found that nearly half of respondents have downloaded music from the internet, and 64 per cent of these respondents have paid for the music.

The largest percentage of respondents who have purchased music online spent between $10 and $20 in the past 12 months, according to the report.

The most popular site is Apple's iTunes, with 53 per cent of music purchasers having used the site.