Digital music boom: Thank the pirates?

Online music will be worth billions by 2010 and, while the evolution may kill off some of the song shops, it's unlikely to kill off piracy - that's the verdict of a new report into the market.

Analyst house Informa Media predicts that the market for buying music over the internet - both downloads and 'hard' formats - will grow steadily for the next few years at a rate of around 21 per cent a year, eventually reaching $6.1bn in 2010.

Revenues from the online song shop boom will mushroom to $3.1bn by the start of the next decade - an increase of around 49 per cent a year from 2004 - but will still only make up some nine per cent of the world's audio sales.

Simon Dyson, senior analyst at Informa Media, said the increase was in no small way down to the increase in broadband penetration.

"Broadband will have quite a big impact... it opens up a whole new way of consuming music, especially with subscriptions," he said.

While the report found that despite the burgeoning song shop market, tunes on portable players were by and large either ripped from a CD or pirated - and the success of piracy remains a double-edged sword for online music, according to Dyson.

"To reach its full potential, [the music industry] needs to get better control of peer-to-peer... it's restricting the growth of legal sales", adding: "You could almost say the pirates set the trend - it got a lot of people used to consuming music [online]."

However, Dyson foresees the digital music market will eventually evolve to look like its high street counterpart, with some heavy consolidation that will eventually leave a few behemoths of the online world catering to the mainstream and some niche players catering to specialised segments, such as jazz.

"Next year, the year after - expect to see some consolidation... I'm not sure if the market will be able to sustain all the companies that have launched," he said. "The big companies are moving from selling music online to selling everything to do with music online - it's difficult for the smaller companies to compete with... [but specialised music] is something the big companies won't be able to do as well as the small guy."