REPORT: ONLINE MUSIC SPENDING TO INCREASE 43%

Following reports that the music industry is in the midst of a slump, comes word that online music sales, often viewed as the music industry’s redheaded stepchild, may very well prove to be its savior.

Consumer Internet music spending will grow from $1 billion in 2001 to $6.2 billion in 2006, a 43% annual growth rate over the next five years, according to a Jupiter Media Metrix report slated for release today (7/23).

Jupiter, which kicks off its annual Plug.In conference today, said 30% of online music sales in 2006 would come from digital downloads and music subscriptions, while the rest will be sales of traditional physical products ordered through the web.

That's a huge leap, given that in 2001, digital sales comprise only 3% of total online music sales.

Jupiter points to the introduction and infiltration of music subscription services as the primary force driving the surge.

Further, the research firm said online music sales will represent 7% of total U.S. music sales in 2001 and 32% in 2006.

All of the major labels are planning to roll out their respective subscription services later this year. Hopes for success are high, especially given the demise of the once-popular file-swapping service Napster. In its report, Jupiter said the total time users spent on Napster plummeted 65% after RIAA litigation, which caused the blocking of copyrighted material and the eventual shut down of the service.