It has been decimated by web piracy and the decline of physical CDs but the global music industry claimed to have turned a corner after recording its first increase in revenues for 15 years.
Industry bosses hailed a return to growth, fuelled by rising digital revenues as music fans sign up to subscription streaming services such as Spotify, which offer instant access to millions of songs.
“The industry is on the road to recovery,” claimed Frances Moore, chief executive of the International Federation of the Phonographic Industry (IFPI), which reported that global recorded music revenues rose by 0.3 per cent in 2012.
The traditional music powerhouses of the UK, US and Germany are still struggling to make the transition to digital. The new growth is being driven by the spread of smart phones and tablets offering legal digital music services in Brazil, India, Mexico and Sweden.
Global hitmakers will increasingly come from South American and Asia. The biggest hits of 2012 included "Gangnam Style" by the South Korean rapper Psy, which attracted 1.2 billion YouTube views and "Ai Se Eu Te Pego" by Brazilian singer Michel Teló. The Portugese-language song sold 7 million downloads after its video went viral and football players adapted the dance for goal celebrations.
The IFPI’s Digital Music Report found that digital revenues increased by 9 per cent to $5.6 billion in 2012 and now account for around 34 per cent of global industry revenues. Legal digital services now operate in 100 markets, helping to drive people away from unlicensed file-sharing services.
The number of people paying to use subscription services has leapt 44 per cent in 2012 to 20 million. Subscription revenues are expected to account for more than 10 per cent of digital revenues for the first time in 2012. The Spotify service now has 5 million paid subscribers, up from 3 million in 2011. In its native Sweden an estimated one-third of the entire population uses the service.
The arrival of Cloud-based music services from Apple, Amazon and Microsoft, allowing people to access their entire music collections from a variety of different devices has helped improve the user experience for licensed services, the report found.
Google is poised to make a major intervention in the market with the launch of its own music streaming service which will include millions of songs from major recording artists. A music streaming service would place Google, which owns video-sharing site YouTube, in direct competition with Spotify.
Google already distributes music via Google Play, where users can purchase songs and albums in a similar way to Apple's iTunes.
But the IFPI called on Google, which is in talks with major labels over accessing their catalogues for the new service, to do more to prevent copyright infringing music files from leading its music search engine results.
Ms Moore said: “This growth is still fragile. Google needs to priorities legal sites in its searches. Far from copyright ‘smothering innovation’, music, based on copyright, is driving the digital economy. Music is driving social network sites. The highest number of searches on Facebook and Twitter are for music artists.”
The report said that the recording industry annually invested 26 per cent of its trade revenues ($4.5 billion) in developing and marketing new talent. British stars helped fuel the return to growth with Adele’s 21 the biggest selling global album of 2012, selling 8.3 million copies. One Direction sold nearly 9 million copies of their two albums.
However the report found that around one-third of internet users globally (32%) are still regularly using unlicensed file-sharing sites.
Ms Moore said the first growth for 15 years was “a hard-won success for an industry that has innovated, battled and transformed itself over a decade. The music industry has adapted to the internet world and learned how to meet the needs of consumers.”