Online music sales will exceed $6 billion in 2010, according to the Informa Media Group (IMG).

A report - 'Music on the Internet' - published today, estimates that the share of global music sales made online will rise from 4.6 per cent in 2004 to 15.2 per cent in 2010. Digital-only sales will account for $3.1 billion of the total, or 7.7 per cent of total music sales.

IMG claims that online sales of physical music media such as CDs will cease to dominate, with the proviso that: "The steady rise of download and subscription revenues will not impact on retail as quickly as some have suggested."

Downloads beat subscriptions

Looking ahead, the report predicts that digital downloads will continue to dominate (in terms of the value of sales) against subscription-based services.

IMG predicts that digital downloads will be worth $422.7 million in 2005 (this year, $179.5 million). Subscription service revenues will climb from this year's estimated $103.7 million to $191.7 million next year.

By 2010, digital download sales will be worth a storming $1,981.2 million, and subscription services will raise 1,124.4 million, the report predicts.

The report points to the success of digital music service launches in "most major territories", particularly that of iTunes Music Store.

"While the continued proliferation of peer-to-peer makes the prospect of legal downloading reaching its true potential unlikely, the successes of 2004 are even more impressive given that every music release is available for free somewhere on the Internet," the report observes.

Converting file sharers critical

Report author, Simon Dyson, said: "This year has been important for the whole of the digital music sector and the momentum created in 2003 has certainly continued all through 2004.

"Converting the file sharers is still central to the long-term success of the industry. Many millions of music fans still prefer to download for free even though the legal services offer such good value."

Peer-to-peer services continue to thrive, with attempts to stop take-up of such services so far having "all but failed", IMG states. "The value of lost sales to the music industry in 2004 remained almost unchanged at $2.1 billion," it concludes.

Format wars, 'no real problem'

On Apple's refusal so far to license its own digital rights management technology to other services, Dyson says: "Although Apple has been criticised for not opening up the iPod to accept other formats or sell downloads in a secure format other than AAC, iPod users are likely to buy downloads from the iTunes music store and so incompatibility is not a problem."

He adds that, because iPods ship with cross-platform iTunes software and can automatically link to the Music Store, there's no real fear that less tech-savvy users will be able to get music in the correct format.

Echoing Needham & Co. analyst Charles Wolf's observation yesterday that all music services essentially offer the same catalogue, Dyson says: "Leading download sites sell tracks for the same price and as such, consumers are unlikely to shop around for a better deal."