LONDON (AFP) - The global music industry is making progress in clamping down on online piracy by evolving radical new ways of selling tunes, but 95 percent of downloads remain illegal, a report said Friday.
New business models helped the legal online music sector balloon for a sixth straight year in 2008, growing by 25 percent to 3.7 billion dollars (2.8 billion euros) in trade value, it said.
But some 40 billion music files were still illicitly shared last year, according to the International Federation of the Phonographic Industry (IFPI) in its annual report on the state of digital music.
"The music sector is still overshadowed by the huge amount of unlicensed music distributed online," it said, citing studies in 16 countries showing that only one in 20 downloads are via legal channels.
Cutting pirates' Internet connections is an increasingly-used option for dealing with persistent offenders, rather than threatening people with fines or other criminal sanctions.
But overall, things are looking up online: digital outlets -- as opposed to CDs and other traditional forms of music -- now account for some 20 percent of recorded music sales, up from 15 per cent in 2007, said the 30-page report.
Sales of single tracks continues to drive the digital music expansion, and were up 24 percent in 2008 to 1.4 billion sales, while online album sales also grew by 36 percent, according to the IFPI's Digital Music Report 2009.
New Orleans rapper Lil Wayne's "Lollipop" was the biggest-selling digital single worldwide last year, with 9.1 million copies sold -- a figure 1.8 million bigger than the best-selling single in 2007.
But new methods of selling are exploding, including a a new generation of music subscription services, social networking sites and new licensing channels, led by services like Nokia Comes With Music and MySpace Music.
Partnerships with Internet Service Providers (ISPs) are also opening up as a new sales route, including TDC in Denmark, Neuf Cegetel in France, Sweden's TeliaSonera and BSkyB in Britain.
"The recorded music industry is reinventing itself and its business models," said IFPI chairman John Kennedy.
"There is a momentous debate going on about the environment on which our business... depends. Governments are beginning to accept that... doing nothing is not an option if there is to be a future for commercial digital content."
The music industry body welcomed the way governments were collaborating with Internet providers to curb piracy.
"In 2008 a tipping point was reached, with governments in France and the UK leading the way in looking to ISPs to help bring piracy on their networks under control," it said.
In particular ISPs are cooperating in cutting Internet access for offenders.
"The momentum for ISP cooperation extends beyond France and the UK. New Zealand will start requiring ISPs to implement a policy of terminating the accounts of repeat infringers in February," it said.
Authorities in the United States, Italy, Australia, Japan, Hong Kong and South Korea are also thinking of such a move, according to IFPI.
There is also evidence that the digital expansion is having a negative effect on locally-produced music, reducing the number of home-grown artists, who struggle due to easy availability of music from around the world.
In France, album releases by new artists fell by 16 per cent in the first half of 2008, and home-grown music accounted for 10 per cent of albums, compared to 15 per cent in the first half of 2005.
In Spain, just one new local artist featured in the Top 50 albums from January to November 2008, compared to 10 in 2003.
Overall, though, the IFPI report was positive, saying it "shows an industry that has shifted its approach from one based only on unit sales of music to 'monetising' access to music across a multitude of channels and platforms