So far, music fans in Britain and France have buoyed sales in those countries even as sales have fallen worldwide.

But the fear of recession and the growth in piracy are likely to make a dent in music sales soon, the report from Merrill Lynch finds.

The internet may have presented the recording industry with a legal and piracy headache but in the longer term - the report argues - it should help boost profits.

Less cash

The report forecasts that in US dollar terms, music sales will fall by 11% this year to $32.9bn (�22.8bn).

As the global economy slows, people will have less cash to spend on music, an industry usually affected badly by economic slowdown.

Sales fell 15% in the 1980 to 1981 recession.

The impact of the recession in the early 1990s was muted by the advent of the CD as people swapped their old record collections for new versions on CDs, the report said.

Music sales are unlikely to recover before 2005, after which Merrill Lynch expects to growth of about 6.5% a year for the following five years.

Music boom

Some argue that new technology could save the industry from the impact of a recession this time around as well.

But while there are new formats - such as DVDs - which should encourage people to spend money on music - the increase in piracy is hitting home.