A new study from Strategy Analytics predicts that online streaming revenues will grow at almost five times the rate of download revenues in 2012. According to Strategy Analytics' latest Global Recorded Music Forecast, streaming revenues will increase 40 percent in 2012 to $1.1 billion while download revenues will increase by 8.5 percent to $3.9 billion. If this prediction holds true, streaming services will take over as the leading revenue growth engine for the music industry in 2012, generating an extra $311 million, which is $8 million more than downloads at $303 million.

Overall digital music spending, including mobile, will increase by 17.8 percent $1.3 billion in 2012 to $8.6 billion compared to a 12.1 percent decline $1.9 billion in physical sales. This means that digital music will increase its share of global recorded music spending to 39 percent in 2012. However, this is still much smaller than physical music sales which will account for 61 percent of spending# Strategy Analytics forecasts that digital spending will overtake physical on a global basis in 2015, However, some countries such as the U.S., Sweden and South Korea, are making the transition to digital taking the lions’ share of spending at a much faster rate#

Ed Barton, Strategy Analytics' Director of Digital Media, explains, "Although downloads still account for nearly 80 percent of online music revenues, this 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."

Barton adds, "Why? Because people are increasingly valuing accessibility and availability over actual ownership of digital music which, in turn, drives growth in streaming services which routinely offer instant access to over 10 million tracks. Additionally, the emergence of cloud storage of a subscriber's existing music library for seamless streaming to a range of connectable devices improves the value proposition further." 

Looking at U.S. music revenue in Strategy Analytics' study, 2012 U.S. streaming revenues will grow at four times (27.8 percent) the rate of downloads (6.7 percent). This growth means online streaming and downloads account for double the share of music spending in the U.S. than globally (41 percent vs. 22 percent).

Conversely, U.S. physical sales are decreasing in 2012 - although less than the global rate - with spending expected to decline by 9 percent in 2012. Physical spending will be overtaken by digital this year in the U.S., compared to 2015 globally.

Barton concludes, "Having stabilized long term revenue declines resulting from the downsizing of packaged music spending, the industry will be hoping that digital can rebuild the U.S. music market to something approaching its former stature."