The worldwide music industry is on a downward spiral despite the growth of online sales. Global spending on recorded music, which tallied US$31.8 billion in 2006, is predicted to decline to $29.2 billion in 2007 and $26.2 billion in 2011. That’s according to eMarketer’s new report, Recorded Music: Digital Falls Short. “Digital formats such as online downloads, ringtones, mastertones, full tracks delivered to mobile handsets and Internet and mobile subscription services are providing new and growing revenue streams,” says Paul Verna, eMarketer senior analyst and author of the report. “But these new revenue streams are simply not enough to pick up the slack from free-falling CD sales,” he adds. US spending on recorded music is expected to drop from $11.5 billion to $9.3 billion in 2011. “The situation in the industry has gotten so bad that many top recording artists are steering clear of music companies and signing up with brand marketers whose expertise lies outside the recording industry,” says Verna, citing alliances between Paul McCartney and Starbucks, the Spice Girls and Victoria’s Secret, and Madonna and Live Nation. In Japan – the world’s second-largest music market after the US – sales of physical music products in the third quarter of 2007 were down by 6.6% on the corresponding period last year, while sales of digital recordings were flat. That suggests Japan’s recording industry may be headed for its first net decrease since 2003. Digital accounts for 18.4% of the Japanese market of all recorded music products, excluding music videos, according to the Recording Industry Association of Japan.