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The European market has shrunk by 22 per cent since 2001 and Screen Digest believes that it will continue to contract for another four years until digital sales can begin to offset the decline.

'Online music has been booming,' said Dan Cryan, Screen Digest analyst. 'However, online sales alone are not going to be enough to halt the decline in music sales.

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The music industry needs to make the most of new delivery platforms. We believe with the right strategy - including mobile and online that the worst might be over by 2010. The industry must adopt a broader approach to selling music, looking beyond the traditional single and album.'

Cryan said that the music industry should look beyond file sharing as a cause of its ongoing decline, noting that according to the industry's own figures, the number of tracks available on p2p networks declined from 1.1 billion in 2003 to 885m in 2005. Instead he suggested that it should examine the extent to which music has been pushed aside by other media. In high street stores such as HMV and Virgin, shelves once filled with CDs now hold DVDs, books and mobile phones.

'Seen in this light the fact that the decline in physical music sales corresponds to the boom in DVD sales begins to look less like a coincidence and more like a cause,' he said.