US consumers will spend more on online music than CDs for the first time in 2012, according to the latest study from Strategy Analytics. The report found that total recorded music sales in the US declined by 7% to $6.2bn in 2010, driven largely by a 16% plunge in CD revenues, to $3.8bn. In 2012 consumer spending on CDs will fall further to $2.7bn, more than $1bn lower than the 2010 level. But online music revenues will continue to grow, reaching $2.8bn in 2012, therefore passing CDs for the first time.

"Digital music is not developing as fast as expected," says Martin Olausson, Director of Digital Media research at Strategy Analytics. "While online revenues will expand further over the coming years, the overall size of the recorded music industry will continue to contract as record companies struggle to identify growth strategies."

The report predicts that while single track downloads will remain the single most important digital music revenue model, advertising and subscription models will gain in importance over the next five years. By 2015 online music revenues are expected to come from a mix of single track downloads (39%), album downloads (32%), subscription (14%) and advertising (14%).

"Music companies must look beyond download-to-own for digital revenue growth," says Jia Wu, Senior Analyst. "With rapid adoption of connected devices and ubiquitous broadband, music fans will expect greater flexibility and wider consumption choices."