The digital music business is booming but 95 per cent of downloads are still illegal and not paid for, according to a report published today.
Making money from digital music is "the biggest challenge for music companies" at the moment, according to the International Federation of the Phonographic Industry's (IFPI) Digital Music Report.
It reveals that the digital music business has grown for six years in succession.
In 2008, it grew by an estimated 25 per cent and is now worth 3.7 billion dollars.
Digital music now accounts for 20 per cent of recorded music sales, up from 15 per cent in 2007.
But that success is overshadowed by the popularity of illegal downloading.
The IFPI estimates more than 40 billion music files were illegally shared in 2008.
That compares with 1.4 billion legal single track downloads in 2008, with the top-selling digital single, Lil Wayne's Lollipop, selling 9.1 million units.
The UK saw one of the biggest increase in digital sales in the first half of 2008 with sales up by 45 per cent.
UK consumers downloaded 110 million single tracks in 2008 and 10.3 million digital albums were sold - accounting for 7.7 per cent of the country's albums market.
John Kennedy, chairman and chief executive of IFPI, said: "The recorded music industry is reinventing itself and its business models. Music companies have changed their whole approach to doing business, reshaped their operations and responded to the dramatic transformation in the way music is distributed and consumed.
"There is a momentous debate going on about the environment on which our business, and all the people working in it, depends.
"Governments are beginning to accept that, in the debate over 'free content' and engaging ISPs in protecting intellectual property rights, doing nothing is not an option if there is to be a future for commercial digital content."
IFPI represents 1,400 companies in 72 countries.