Research suggests digital consumption offset physical slump "by 2010".

Jupiter Research claims the music industry's period of transition will end with a three-tiered, multi-platform digital model based around consumption

A new generation of "platform-agnostic" music services, blurring the distinction between music sales via PC and mobile, will eventually help digital revenue to offset the declining CD market, according to a new report from Jupiter Research.

The report - European Next-Generation Digital Music Services - sets out to answer the question of how digital music offerings are set to change in the near future and to what extent these changes will affect customer adoption.

It concludes that, while a combination of problems with DRM/interoperability, a lack of willingness among consumers to pay for digital music and a dependence on PCs and personal MP3 players have hindered the mass-market adoption of digital to date, the time is now ripe for digital music services to capitalise on the "malaise-driven" boldness of the major labels and seek licences for innovative services that may not have been considered previously.

Similarly, it says labels should use the next couple of years to "aggressively expand experimentation" and monitor the success of diverse digital music offerings.

Looking forward, the report predicts that, while the European music industry will not be able to recreate its 2001 "high-water mark" for revenues, income from mobile and PC services, as well as ringtones, will offset the decline in CD sales by 2010, with a 4.5% increase in music sales in 2012.

"The music industry is not dead," says Jupiter Research vice president and research director Mark Mulligan. "It is going through a transition phase where it is learning what business models it will rely on."