New data from the analysts at JupiterResearch forecasts that digital music spending in the US will reach $2.5 billion in 2011.

The forecast — published in a new report, 'US Music Forecast, 2006 - 2001' — claims digital download spending will grow at a 16 per cent compounded annually over the next five years, while the smaller subscription service business will grow at 32 per cent.

"Strong hints of digital substitution — consumers buying digitally instead of buying CDs — are finally appearing among early digital music users," said David Card, vice president and senior analyst at JupiterResearch. "Last year we witnessed downloads growing over 30 per cent, to over $800 million and subscription services grew 14 per cent, to over $185 million."

The analysts warn that digital sales will not compensate for lost CD sales over the next five years, nor will they return the overall music industry to growth. Combined, digital music sales will total 22 per cent of US consumer music spending by 2011, they believe.

"The music download business will remain a sampling medium for many users rather than a CD replacement," said David Schatsky, president of JupiterKagan. "For the next several years, on-demand subscription services will appeal primarily to niche audiences among music aficionados."