UK consumers will spend £1.7bn a year on downloading music, films and ebooks from the internet and on mobile phone content by the end of the decade, according to research for online payments system PayPal Europe by carried out Datamonitor.

The study shows that spending on internet and mobile phone downloads and online gaming could account for as much as 10% of all online retail spending in the UK by 2010.

The biggest growth areas for digital downloads are the mobile and music industries, which will account for nearly nine in ten (89%) of all consumer spending on digital content.

However, by 2010, film downloads and online gaming will have become substantial markets and the e-book sector is also expected to be showing early signs of development.

Consumer spending on online music downloads will total £379m in 2010 according to the research.

The market in the UK was worth £35m in 2005, but is expected to grow ten-fold in the next five years as legal download sites such as iTunes gain greater traction.

The growth in value of legal music downloading will mean that Internet music will account for around 15% of all music sales by 2010.

The report predicts that the average UK web user will download 25 tracks and spend £15 on Internet music content in 2010 – average per-track prices will come down to around 60p as record companies continue to embrace the Internet and levels of competition between service providers increase.

Increased content and flexibility of packages are also likely to encourage more people to download more music, the research found.

Mobile services including music, movie clips and mobile TV services will create a market for digital content worth £1.14b by 2010, the report predicted, going on to say the market will grow three-fold from £380m in 2005 as the rise of 3G mobile will spur consumer spending on mobile services.

In 2005, ringtones, realtones and screensavers accounted for around two-thirds of mobile content spend, with games accounting for the majority of remaining revenues.

However, full-track music will account for an increasing proportion of content spending – UK consumers will spend over £200m mobile music in 2010. Video downloads will also increase in popularity, accounting for around 11% of mobile content spend within the next 4 years.

Meanwhile, eBooks and online gaming will be areas where substantial growth will be seen, according to the report.

The UK online film download market will be worth £109m by 2010, rising from virtually nothing today. PayPal expects online downloads in the large part to supplement rather than replace traditional means of obtaining film content (DVD purchase, DVD rental and subscription/digital TV).

However, it is likely that services such as iTunes film download will create a market for film download and that new players offering streaming “film on demand” will have started to make inroads by 2010.

UK gamers will spend £67m online in 2010, which represents 70% growth from today. The market is currently worth £39m, derived in the main from subscriptions to PC-based online services.__However, by 2010 spend on services within games – buying new levels and characters – is likely to increase to around £9m. Subscriptions for console-based services such as Xbox Live are also likely to rise dramatically.

Story filed 26.03.06