Online music sales plummeted by 39 percent from this time last year, pushed by increased file sharing and CD burning, according to the latest study from research firm ComScore Networks.

The decline in online sales of CDs and other physical recorded media could pose a serious threat to the music industry, which appears to be losing its battle against the proliferation of free music available online. The research shows that not only are online music sales dropping, they are declining at an accelerated rate.

Year-on-year 2002 online music sales fell 12 percent in the first quarter and 28 percent in the second before diving 39 percent in the third.

Furthermore, the research said that sales for the first three quarters of the year fell 25 percent over last year — from $730m in 2001 to $545m this year.

The drop corresponds to the rocketing growth of P-to-P (peer-to-peer) file sharing services such as Kazaa and Morpheus. Both services had less than a million monthly US home users in June 01, but by March 02 Kazaa had swelled to 5.8m users and Morpheus boasted 7.2m.

The growing popularity of file sharing services has not gone unnoticed by the music industry which has tried to throw lawsuits, legislation and consumer education in their way. Despite these efforts the services have retained their grip, proving the irresistible lure of something for nothing.

The Riaa (Recording Industry Association of America), the group that represents the major labels, said last August that CD shipments for the first half of 2002 had dropped seven percent over the same period a year ago.

Upon releasing its figures in August, Riaa President Cary Sherman said, "Cumulatively, this data should refute any notion that illegal file sharing helps the music industry."

It makes sense then that the steepest sales declines would be among online, net-savvy users. According to research provided by the Riaa, 35 percent of young internet-connected music buyers said that the first thing they do after hearing music they like by an unfamiliar artist is to download the song for free.