Some 19 out of 20 music tracks downloaded from the Internet were illegal, hitting demand for legitimate sales of physical and digital tracks and albums, according to the IFPI.

"As an industry we remain very challenged," the IFPI chief executive Frances Moore told reporters. "We are working in a very, very difficult environment. Nineteen out of 20 music downloads are illegal.

"We had independent research last year that says that in Europe we could lose 1.2 million jobs in the creative sector by 2015, which is about 10 percent of the work force."

The overall drop in global music sales, which followed a 7 percent fall in 2009 to $17.3 billion, came despite a six percent rise in digital music sales to $4.6 billion which accounted for 29 percent of record companies' trade revenues.

The digital growth follows a drive by the music industry to sign more deals with new services such as mobile firms, Web sites and advertisers, however critics have argued that the process of signing licensing deals with major record labels is still a long and complicated affair.

Max Hole, the Chief Operating Officer of Vivendi's Universal Music Group International, said the industry did have reasons for optimism as more consumers were using smartphones and tablets to access music and music video.

And piracy had also dropped in countries where governments had taken action, such as South Korea and France.

However he warned that they were having to cut jobs in the most difficult markets while smaller, independent labels were struggling to survive, and said the difficult times faced by the music industry were also now confronting other creative industries.

He likened the last few years, when the value of the global recorded music industry has fallen by 31 percent since 2004, to the opening scenes of carnage depicted in Tom Hanks' World War Two movie about the Normandy Landings.

"A friend of mine once said to me that it's like Saving Private Ryan. The first 20 minutes, those soldiers on the beach, that's the music business," he said, before adding that the same experience was awaiting the film, TV, books and newspaper industries.

"But governments are realizing that this is at the heart of commerce for the creative businesses and that you can't have chaos."