Global online music revenues are expected to rise by about 7 percent this year to $6.3 billion as digital services such as Spotify and iTunes gain momentum, technology research firm Gartner said on Tuesday.
But sales of CDs, hurt by piracy as well as paid-for online distribution, will continue to decline faster than can be made up for by digital sales, as the music industry struggles to adapt to consumers' changing behavior, Gartner predicted.
By 2015, Gartner forecasts online music spending will rise to $7.7 billion from $5.9 billion in 2010. In the same period, consumer spending on CDs and other physical music forms is seen falling to about $10 billion from $15 billion.
The music industry was the first media sector to feel the full impact of two major forces -- the Internet and technology-empowered consumers, Gartner analyst Mark McGuire said in a report.
It has staggered through the first decade of the 21st century and entered the second bedraggled financially and facing a powerful set of intermediaries, which are creating borderless global ecosystems that defy the industry's previous notions of control and monetization, he wrote.
Many consumers took early advantage of the Internet to illegally share music through services like Napster, hurting music labels like Universal, Warner and EMI that still dominate the industry.
But the convenience of legal purchasing from stores like iTunes is increasingly encouraging consumers to pay for music and the big labels are also raising more money from live music, sending many stars who had given up touring back on the road.
In addition, a host of subscription services to streamed music like Spotify, Lastfm.com and Pandora are gaining popularity. These are often offered by third parties keen to exploit a new market, including Facebook and mobile operators.
Gartner expects subscription services to be worth $2.2 billion by 2015, accounting for 29 percent of all online music spending by consumers.