People will never pay for music on the internet unless the record industry comes up with a better idea than peer-to-peer file swapping, says a new report.

The report reveals that court action, like that by the RIAA (Recording Industry Association of America), is not enough to win the battle against free services such as KaZaA and Morpheus and that record companies will have to offer "compelling alternatives" if people are ever to pay for music on the web.

Subscription services such as MusicNet and Pressplay, where people pay a fee to download their favourite songs, have proved to be expensive flops as people flock to file-swapping services where they can download tracks for free.

"I don't think services such as MusicNet and Pressplay will ever be viable," said Mark Mulligan, the author of the report. "They're Beta versions, a statement of intent by the music industry. It would be better for the record companies to wipe the slate clean and start again," he added.

He said record labels could make the subscription model work if they learned to better exploit advantages over the free services.

Music executives have blamed file-swapping services for last year's fall in record sales. According to the RIAA, sales of all music formats dropped by 10.3 percent in 2001.

But Mulligan disputes this claim. According to him, that fall in sales is due to people no longer replacing their vinyl collection with CDs.

Also, while sales have dropped off in the USA, the British Phonographic Industry says UK spending on music in all formats was up by 5.3 percent in 2001 to £1.2bn.

Free peer-to-peer services notched up an average of 11 million unique visitors in Western Europe alone from January 2002 to March 2002, according to the report. Legitimate music sites averaged just 2.5 million visitors in the same period.

It adds that record companies risk alienating future customers by seeking to close down peer-to-peer networks. The research found that 52 percent of peer-to-peer users are under the age of 25 — and it's this youth that the RIAA et al do not understand.

"They are the new generation of music buyers and are currently more likely to use download services online than buy entire albums in music stores," says the report.

The results are based on data gathered from the UK, France, Germany, Italy, Spain, Sweden and Switzerland.