Also expects digital to outpace physical by 2007.

Research and analyst firm In-Stat predicts online music sales will grow from $1.5 billion in 2005 to $10.7 billion in 2010 worldwide. The prediction includes digital downloads, subscriptions and physical media purchased online.

The company also expects revenues from downloaded music, including mobile music downloads and ringtones, will outpace revenue brought in from physical media by 2007.