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Digital music sales overtake physical for first time

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Jessie J performs on the main stage during the Big Chill Festival 2011 at Eastnor Castle Deer Park in Herefordshire.

© PA Images / Rowan Miles/EMPICS Entertainment

UK sales of music via digital downloads and streaming services such as Spotify and We7 outpaced physical sales for the first time in the opening three months of 2012, a new report has said.

According to data released by trade body the British Phonographic Institute (BPI), digital accounted for 55.5% of UK trade revenues in the first quarter of this year, generating a total of £86.5m, up 23.6% year-on-year.

Total UK record industry revenues were up 2.7% year-on-year to £155.8 over the same period, but sales of physical formats such as CDs were down 15.1% to £69.3 million.

The report was released the day after Sky blocked access to file-sharing site The Pirate Bay in the UK following a successful court action by the BPI.

The BPI said that a "diversified revenue base and strong growth in a la carte albums sales and paid subscriptions" helped digital account for the biggest proportion of recording industry earnings for the first time in Q1, 2012.

Sales of digital albums "contributed significantly" to the rising digital revenues, said the BPI, as they were up 22.7% to £35.9m, outstripping earnings from downloads of single successive tracks for the second successive quarter.

Paid-for digital music subscription services performed even stronger, with income up 93% year-on-year to just under £9m.

Advertising-supported, free music streaming services, such as Spotify and We7, pulled in first quarter revenue of £3.4m, up 20% on the same period in 2011.

BPI chief executive Geoff Taylor said that the quarterly results represent a "significant milestone in the evolution of the music business".

However, he also warned that the shift to digital will have to continue over several quarters to prove that the industry has "turned the corner".

"UK record labels have embraced digital to their core, supporting innovation and licensing more new online and mobile services than any other country. As a result, the industry's prospects for growth look brighter than for several years," said Taylor.

"We will need to see this trend repeated for several quarters to say we have turned the corner - demand for physical CDs remains strong in the UK, especially in Q4.

"However, the creativity, investment and digital expertise of the British music industry point the way forward for growth in the UK economy."

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