PRS for Music, the body that represents 85,000 songwriters, composers and music publishers in the UK, today reported a 3.2% rise in royalty payments for 2011 to £630.8m, up from £611.2m in 2010.
It said that a boost in revenue from digital services and international markets helped mitigate a double-digit slump in royalties from the sale of CDs and DVDs.
Online revenues from licencing music to streaming services such as Spotify and we7, or selling it directly on Amazon and iTunes, increased 45.3% to £38.5m. This now accounts for a record 6% of all royalty collections.
Royalties from the use of British music overseas were also up 10.6% to £187.7m, due to the global popularity of acts such as Coldplay and Adele. International income is now one of the largest revenue streams for UK musicians, said PRS.
However, artists suffered from a 13.3% drop in royalties from the sale of music products, including CDs and DVDs, down to £101.6m. This was a steeper decline than the 8.8% fall in 2010.
PRS for Music said that this reflected the "market shift away from these formats towards digital distribution of music and entertainment".
"The continuing popularity of our music in other countries demonstrates the global success of the UK music industry," said PRS for Music chief executive Robert Ashcroft.
"Our efforts to support copyright at home and abroad, combined with the energy we continue to put into the licensing of new digital services, enabled us to pay additional royalties to our members last year."
Ashcroft said that the growth in digital revenues was down to efforts to direct users towards legal services and also combat online piracy, such as recent actions against Megaupload and RNBXlusive.
"The licensed digital market is now delivering a significant income stream for our members," he explained. "This goes some way to replacing revenues lost from the declining CD market although online piracy continues to be a problem.
"The way we consume music is changing, but PRS for Music is adapting to ensure those that create it can continue to earn a living."
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Income from live UK performances grew 8.2% year-on-year to £22.5m, while royalties from music being used in pubs, clubs and shops grew by 0.9% to £131.4m.
Income drawn from music played on radio and TV shows grew 1.2% to £149m - radio revenue was down 5.4% to £46.8m but TV earnings grew 5.7% year-on-year to £101.6m, as music becomes a central part of hit shows such as Sherlock and MasterChef.
PRS for Music said that its costs rose £10.2m as a result of "investment in future revenue growth and cost reduction initiatives". This was also down to "a one-off charge for historic pension related issues that is not expected to reoccur".