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Digital music spending to outstrip analog spending globally by 2015

Here’s a potentially surprising piece of trivia masquerading as news (or vice versa, dependent on whether or not you work in the music industry): According to analysts, we’re just three years away from seeing global digital music sales surpass physical music sales, with digital sales set to rise more than 15 percent worldwide by the end of the year. The real question is, which part of that is the most surprising?

The prediction comes courtesy of international market research company Strategy Analytics, specifically the company’s latest “Global Recorded Music Forecast” report. The report explains that digital music spending will represent 39 percent of global music spending this year, with streaming digital content rising by an impressive 40 percent throughout the year to become the dominant growth engine for the digital format (Download growth is at 8.5 percent worldwide); however, downloads still represent the bulk of digital spending generating $3.9 billion to streaming’s $1.1 billion. Overall digital spending is expected to be up 17.8 percent for 2012 – reaching $8.6 billion – compared with a 12.1 percent decline in physical sales.

Based on the movement of the markets, Strategy Analytics is predicting that 2015 will be the first year where digital global spending outstrips physical spending in terms of music, although it points out that some countries – amongst them, Sweden, South Korea and the US – are already ahead of the curve in that respect. It’s that last point that reinforces my point from above: Doesn’t it feel as if digital music spending should already be above physical spending by this point? Hasn’t analog music become an entirely niche market already?

That attitude likely comes from my location-based thinking. According to the Global Recorded Music Forecast, digital music spending in the US is almost double what it is, percentage-wise, in the rest of the world – 41 percent to 22 percent – which, combined with the decline in physical spending, underscores the feeling of digital being where it’s at, these days (Interestingly, despite the increased spending percentage for digital, the decline in physical music spending in the US is actually slower than globally; just 9 percent). In fact, the US is well ahead of the curve when it comes to the digital tipping point; we’re expected to see digital music spending outweigh analog as early as this year, if predictions hold.

According to Strategy Analytics director of digital media Ed Barton, this changeover may mean a turnaround in fortunes for the American music industry. “Having stabilized long term revenue declines resulting from the downsizing of packaged music spending,” he explained, “the industry will be hoping that digital can rebuild the US music market to something approaching its former stature.”

A large part of that rebuilding effort will rely on the continued success of the streaming music format; as with the global view, streaming is growing faster in the US than downloading, with growth rates hitting 27.8 percent against downloading’s 6.7 percent. As Barton points out, “this [download] market is maturing and spending is flattening in all key territories. Streaming music services such as Spotify and Pandora will be the key growth drivers over the next five years as usage and spending grow rapidly.” Good news for Spotify, Pandora and the like, but maybe not such good news for the record labels that were hoping to see a renewed emphasis on actual sales any time soon..