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Digital music spending in the U.S. will comprise over a third of consumer music purchases by 2012, but will not make up for lost CD sales during that time according to a new report from JupiterResearch, "US Music Forecast, 2007-2012."

Digital music spending will reach $3.4 billion over the next five years, as CD sales will continue to decrease. "That means digital music sales will not compensate for lost CD sales in five years," said David Card, Vice President and Research Director at JupiterResearch. "Nor will they return the overall industry to growth. But digital's where the growth is."

According to the report, music downloads will replace CDs for many-but not most-music buyers in five years. In the near future, on-demand subscription services will attract mostly niche audiences among music fans.

"The music download business will serve as an alternative, but not a replacement to CDs. As detailed in our report, there are still those consumers who prefer a tangible product," said David Schatsky, President of JupiterResearch.

"One size does not fit all when it comes to acquiring music and consumer behavior toward the variety of formats available reinforces that claim."