Music companies made $1.1bn from downloads last year, and this method of buying is expected to account for 25 per cent of the global music industry by 2010, according to the International Federation of the Phonographic Industry (IFPI).
Singles downloads doubled to 420 million in 2005 and the number of subscribers nearly doubled to 2.8 million. The year's most popular single was James Blunt's You're beautiful.
"There will be further significant growth in 2006 as the digital music market continues to take shape," said IFPI chairman John Kennedy.
"Already in the UK and Germany, two of the biggest digital markets worldwide, legal buyers from sites exceed illegal file swappers. We expect this trend to spread as new and pioneering legal music distribution channels open up to consumers."
The report found considerable differences in buying patterns across Europe. Germany and the UK are more into PC downloads, while mobile downloads account for half of all sales in France and 80 per cent of all sales in Italy.
The number of songs available online has doubled over the past 12 months, and the IFPI estimates that 165,000 albums are now available online.
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