Last year, consumers downloaded 795 million tracks legally, up 89 percent from 2005, a major triumph in the fight against piracy.
Global digital music sales almost doubled in 2006 to around $2 billion, or 10 percent of all sales, but have not yet reached the industry's "holy grail" of offsetting the fall in CD sales, a trade organization said.
In its 2007 Digital Music Report, the International Federation of the Phonographic Industry (IFPI) said on Wednesday it expected digital sales to account for a quarter of all sales worldwide by 2010.
"The digital music market is growing strongly," IFPI Chief Executive John Kennedy told reporters.
"To double over the last 12 months is fantastic. I don't think anyone will expect it to double in 2007 but we believe it will grow in percentages that any industry would be proud of."
But Kennedy said the growth had not yet offset the drop in the physical market, with sales of CDs down 23 percent from 2000 to 2006, however he had seen encouraging signs from the three biggest music markets in the U.S., Japan and Britain.
"There is nearly the holy grail in three major markets - the United States, Britain and Japan. Next year I would like to be announcing that is the case for around 10 markets."
He did not give a figure for the overall music market in 2006 but said it was expected to be down in the region of 3 percent, the same drop that was recorded for 2005.
The report said consumers last year downloaded 795 million tracks legally, up 89 percent on 2005, from almost 500 online music services available in 40 countries.
The number of tracks available online doubled to reach over 4 million on leading services, it said.
The music industry has been damaged in recent years by Internet piracy but it has begun to fight back by targeting file-trading and offering and supporting legal alternatives such as Apple Inc.'s iTunes.
The group has launched 30,000 actions against illegal file-sharers, with 10,000 in 2006 alone.
On Wednesday, Kennedy said 2007 would be the year it also targeted Internet service providers. He said the IFPI had approached the ISPs about taking more responsibility for stopping illegal music file-sharing but said the response had so far been disappointing. He said ISPs were in a position to disconnect consumers who were involved in file sharing and copyright infringement, but with little sign of activity, the IFPI was ready to open law suits against the ISPs themselves.
"With cooperation from ISPs, we could make huge strides in tackling content piracy globally," Kennedy said in the report.
IFPI lawyer Geoff Taylor told Reuters it could provide the basic details to ISPs of users who were uploading significant amounts of music onto the Internet for others to share.
"We're expecting to see significant progress towards resolving this in 2007 and ultimately if the ISPs don't come to the table in a way which helps us deal with the problem then obviously we'll have to use the legal rights that we have," he said.
Kennedy said he had been encouraged by the UK government which has indicated it will monitor the situation throughout the year and urge the ISPs to engage further in the fight against piracy.
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