The recording industry reported a tenfold increase in the number of people legally downloading music from the Internet and the first significant revenues brought in by digital sales.
The International Federation of the Phonographic Industry, or IFPI, also warned on Wednesday that it would continue with its campaign of lawsuits against people who illegally download music, a practice it claims severely erodes the profits of its 1,450 member record companies across the globe.
The IFPI said music fans in the US and Europe legally downloaded more than 200 million tracks last year, up from about 20 million in 2003. That contributed to estimated digital music revenues of around US$330 million last year, up sixfold from the previous year.
"Digital music is now in the mainstream," said John Kennedy, the chairman and CEO of the IFPI. "There was major growth in 2004."
The IFPI said there are now more than 230 online sites where consumers can buy music legally, up from 50 a year ago.
Music on mobile phones is also becoming increasingly popular, with Asia leading the way -- the Japanese ringtone market was worth US$100 million last year.
Industry forecasts for future digital growth vary. Some analysts suggest that 25 percent of record company revenue could come from digital sales by 2010, others put the figure at less than 10 percent -- up from 1 to 2 percent now.
Some analysts said issues about the compatibility of handsets and disagreements between publishers and record companies over music royalties could slow further growth.
Simon Dyson, an analyst with Informa Media Group in London, also warned against suggestions that the number of Internet pirates seems to falling -- the IFPI estimates there were 870 million illegal music files available online in January, down from 900 million a year ago.
"It's almost predictable that the industry would put a very, very positive spin on it and there are some elements of good news," Dyson said. "The way they suggest that piracy has reached a point where is not going to grow anymore is possibly incorrect."