Online music is a relatively new phenomenon

She added: "When 23% of surveyed music consumers say they are not buying more music because they are downloading or copying their music for free, we cannot ignore the impact on the marketplace."

Slump

The value of all music product shipments decreased from $14.3bn (�10.03bn) in 2000 to $13.7bn (�9.6bn) in 2001, according to the figures released by the RIAA.

Last year a similar drop in CD sales prompted some experts to say the fall was part of an industry-wide slump, due to economic factors and a weak year musically.

The figures are based on sales to outlets and not on sales directly to consumers.

Global piracy costs the recording industry over $4bn a year

Hilary Rosen, RIAA

The RIAA study also found that more than 50% of music fans who have downloaded music for free have made copies of it, while two years ago only 13% of fans copied music on to a portable device or a CD burner.

Ownership of CD burners has tripled since 1999, the survey found.

It was the phenomenal success of online music services such as Napster which first highlighted the impact of downloaded music to record companies.

At the height of its use, Napster had more than 25 million users.

Lawsuit

It was shut down by record companies in a legal battle over copyright payments but has spawned a host of similar services.

The companies are still seeking damages from Napster for allowing copyrighted songs to be trafficked by users who were able to swap and download recorded material for free.

Earlier this month Napster was given more time to gather evidence before the ruling on the lawsuit.

Legitimate, paid-for systems launched by the record companies have yet to catch on as many users can still find copied versions of their favourite tracks elsewhere for free on the internet.

Threat

CD burning is also becoming an increasing concern for record companies, with recordable CDs costing less and less.

"Global piracy on the physical side costs the recording industry over $4bn (�2.8bn) a year," said Ms Rosen.

"That doesn't even include losses online. While the physical piracy problem is not new, our markets continued to expand. Now that consumer purchasing is threatened as well, the impact of all piracy is greater," she added.

Despite the situation in the US, the UK's CD market bucked the downward global trend and enjoyed a bumper year, with sales increasing by more than 5% in 2001.