Forty songs are being downloaded illegally for every legal music download, according to estimates produced on Thursday as the record industry scored one of its biggest victories against online piracy.
Some 20bn songs were downloaded illegally last year, compared with a legal digital market of about 500m tracks, the IFPI, the international music industry lobby group, said.
The estimate came as the IFPI and its US counterpart, the RIAA, confirmed a settlement with Sharman Networks, which distributes the Kazaa peer-to-peer software applications thought to account for up to 15 per cent of music file-sharing.
Under the terms of the deal, Sharman will pay Universal Music, Sony BMG, EMI and Warner Music more than $100m - the biggest settlement fine by far in any music piracy lawsuit.
The music companies will also receive 20 per cent of future income from Kazaa after it agreed to adapt to a legal model.
"Kazaa was an international engine of copyright theft which damaged the whole music sector," said John Kennedy, chairman and chief executive of IFPI. "This brings the biggest piracy brand in the world into a legal model."
Mark Mulligan of Jupiter Research questioned how large a market the labels would be able to tap with a legitimate version of Kazaa, however. "This is about two years too late. Kazaa isn't what it used to be," he said.
The music industry has made a determined effort to convert peer-to-peer networks that facilitated piracy into legitimate outlets for online distribution.
Their cause was aided by a landmark US Supreme Court ruling last year in the MGM-Grokster case, which undermined the legal grounds for file-sharing networks by declaring that they could be held responsible for copyright violations committed by their users.
In spite of Grokster's decision to cease operations and other networks' agreements to install filter technology and curb abuses, music piracy is still rampant, and the industry is pursuing cases against services such as Limewire and eDonkey.
David Munns, vice-chairman of EMI Music, said the financial settlement would merely offset the cost of fighting the music industry's legal battles.
Legal downloads have grown into a market worth an estimated $1.1bn last year, and Mr Kennedy said he believed progress was being made against piracy. One study commissioned by the RIAA found that the number of US households illegally downloading music had held stable a year after the Grokster decision. However, the amount of content they were stealing had increased.
Security experts say consumers move to new file-sharing services as older ones are shut down. They also note that the spread of broadband internet access in eastern Europe and other markets is leading to more illegal file-sharing.
