January 10, 2008, 12:00 AM

Digital music revenue will hit $5.34 billion by 2012, study forecasts

Revenue from digital music, both online and mobile, is growing, and will reach $5.34 billion by 2012, according to researchers Yankee Group. Digital music revenue totaled an estimated $1.98 billion last year.

Revenue from digital music, both online and mobile, is growing, and will reach $5.34 billion by 2012, according to research firm Yankee Group. Digital music revenue totaled an estimated $1.98 billion last year.

In addition, online music will grow faster than mobile music downloads and online single downloads will outpace album downloads or subscriptions, Yankee Group says in its “U.S. Digital Music Forecast: What Fate Awaits the Record Labels?”

Revenue from store sales will fall to $4.9 billion in 2012 from an estimated $8.6 billion last year, according to the forecast. Consumers pay an estimated 99 cents for a la carte music downloads, with the average transaction at an online music store totaling $3 to $4, Yankee Group says. That compares with $25 to purchase an album at a store.

And despite wireless carriers’ best efforts, online distribution will continue to dominate the category, accounting for 80% of the industry revenue, according to the forecast. Although the market for music phones will have grown to more than 266 million by 2011, only 9% of mobile users will actively use them as portable music players.

Online music revenue will total $5.34 billion by 2012, compared with $1.07 billion for mobile digital music revenue.

Digital music accounted for 23% of all music purchases last year, as units of digital track sales rose 45% to 844.2 million from 581.9 million in 2006, according to Nielsen SoundScan. Digital album sales rose 53% last year to 50 million units from 32.6 million in 2006, as online sales of physical albums rose 2.4% to 30.1 million units from 29.4 million, Nielsen SoundScan reports.

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