Digital music sales 'to grow 50 per cent this year'

Digital music sales in the UK look set to receive a substantial kick over the next year as competitors such as Nokia up the ante in the battle against iTunes while major music companies free songs from restrictive anti-piracy software.

Verdict Research estimates that legally sourced digital music sales will grow nearly 50 per cent this year to £163m, a slowdown from growth of over 80 per cent in 2006. But the research company said it expects the legitimate digital music market to continue to grow rapidly over the coming years as the likes of Nokia and HMV challenge Apple's dominance. It expects the market to be worth £600m by 2012, accounting for more than 13 per cent of total music and video sales, compared with 4 per cent this year.

Apple's iTunes has around 80 per cent of the digital download market but is steeling itself for an onslaught of competition from retailers such as HMV and Woolworths as well as the emergence of the mobile phone giant Nokia as a serious contender in the online music space.

David Pakman, chief exec-utive of eMusic, the second larg-est digital music store, said the move by some music majors to test the water for digital music that is unencumbered with anti-piracy – or DRM – software could also kick-start substantial growth. It is telling that DRM-encrypted songs which limit how a consumer can use the music accounted for only 10 per cent of the 20 billion songs downloaded globally in 2006.

Yet some analysts argue that digital music is still a long way off being the panacea for the industry's troubles. Mark Milligan, an analyst with Jupiter Research, said: "People that buy music online are only grazing. When they start using digital services, they tend to spend less, not more." He said the 80 per cent of people who do not buy music regularly would traditionally buy a few albums a year but can now cherry-pick a few tracks. "Music aficionados" who spend £70 a month on music have started subscribing to cheaper online subscription services.