The music industry saw a tripling of digital music sales in the first half of 2005 that was spurred by mobile phone "ringtunes" and online services.
Digital music now makes up 6 per cent of total sales, or about $790 million, according to first-half figures released today by the International Federation of the Phonographic Industry (IFPI) trade group.
Sales of CDs and other physical formats continued a long decline, however, which the music industry has blamed mainly on piracy, falling to $13.2 billion from $13.4 billion a year earlier.
"It feels as if the decline is lessening," said IFPI Chairman and Chief Executive John Kennedy, who has predicted that full-year sales will be roughly flat.
The IFPI said that lower CD prices, flagging DVD music video sales and competition from other entertainment sectors also contributed to the decline.
The music industry has used a carrot-and-stick approach to reverse flagging music sales by promoting digital music services such as iTunes, Napster and Rhapsody while aggressively targeting illicit downloaders with lawsuits.
Despite the success of the market-leading iTunes service, Apple and the music labels may be heading for a showdown when licence agreements expire in the spring.
The labels are pushing for the ability to charge different rates for different songs, while Apple is insisting that its flat-price model be maintained.
In recent months the music industry has also won legal victories against peer-to-peer services such as Grokster and Kazaa and is trying to force other P2P companies to block copyrighted material that is traded on their networks.