Digital Music Sales Nearly Double Worldwide in 2006

Global digital music sales almost doubled in 2006 to around $2 billion, or around 10 percent of all sales, but failed to compensate for an overall decline in sales of CDs, the global music industry trade body said Wednesday.

The International Federation of the Phonographic Industry, or the IFPI, said it expected digital sales to account for a quarter of all sales worldwide by 2010.

"We don't have the holy grail of digital offsetting the decline of CDs as yet," IFPI Chairman John Kennedy said in London after the release of the group's 2007 Digital Music Report.

The report did not give details on the size of the overall music market in 2006, but Kennedy said it had fallen approximately 3 percent.

In early 2006, the IFPI said it believed growth of digital music formats such as mobile would be such that they would compensate globally for the declines that the industry has recorded over the past five years due to illegal file-sharing, piracy and competition from new media.

Kennedy said he now hoped that would become the case — or close to it — sometime this year.

"There's nearly the holy grail in three major markets — the United States, Britain and Japan. Next year I would like to be announcing that is the case for around 10 markets."

However, the report showed that growth in digital sales has slowed compared to 2005, when sales nearly tripled to $1.1 billion from $380 million in 2004.

Single track downloads totaled nearly 795 million in 2006, up 89 percent on the 420 million digital singles sold in 2005. The United States accounts for the bulk of those sales, with 582 million single tracks sold digitally in 2006, up 65 percent on 2005.

The U.K. is the world's second-largest market for digital music sales, with 53 million single track downloads sold in 2006, double the number sold in 2005.

Kennedy pointed to mobile music sales as a major area for growth this year. Mobile sales already dominate the digital music market in Italy and Spain and several Asian countries, outstripping single track sales, the IFPI said.

Mobile music accounts for 90 percent of the digital sales in Japan, although online music sales doubled to roughly 22 million in 2006 after the launch of Apple Inc.'s (AAPL) iTunes there in 2006. Mobile is also the dominant digital music format in India and South Korea.