Global music sales fell about 2 percent last year as surging digital music revenues failed to offset continued declines in physical media like CDs, the head of the industry's trade body said.
Sales for 2006 are expected roughly flat, said John Kennedy, chief executive of the International Federation of the Phonographic Industry, as the music business sees increasing benefits from selling songs online after its long-running battle with illicit online file-sharing.
"We have tipped the scale on Internet piracy. Newcomers are going to legal online stores," he said at the music industry's annual Midem conference this weekend.
Roughly three-quarters of countries and regions have submitted their music sales figures for 2005, with final numbers due in March. Global music revenues in 2004 were $33.6 billion.
Digital music revenues increased threefold in 2005, to about $1.1 billion.
IFPI research shows that more consumers in Britain and Germany are now opting for legal online music services than for file-sharing networks such as Kazaa. The situation is reversed in Spain, France and Sweden, where file-sharing is twice as common as legal online services.
"Converting illegal file-sharers to legal consumers will take time," Kennedy said in a briefing at the music industry's annual conference in Cannes.
The music industry has relied on a carrot-and-stick approach, launching a range of legal music stores at the same time it is filing lawsuits against illicit file-sharers.
Riding high on legal victories against Kazaa and Grokster, the industry is now in talks with many of the peer-to-peer file-sharing networks to put in software filters that will screen out copyrighted materials.
"The legal landscape has tilted dramatically," said Eric Nicoli, chairman of the world's third-largest music company, EMI Group. "We have to work with everyone to discourage this."
The music industry has also been pushing for Internet service providers (ISPs) to join their campaign, but with little success so far.
Kennedy said he has seen "a zero response from ISPs" since giving a speech to their trade body nearly a year ago, and that more drastic action may be needed.
"Litigation is the last resort," he said. The music industry has already filed lawsuits against tens of thousands of file-sharers in the last several years.