Despite success in suing people who download music illegally and in reaching deals with personal networking sites like YouTube, the music industry is still bleeding millions of dollars in sales to online piracy. It is a major issue for an industry that is desperately trying to boost revenue from legal downloads to make up for falling sales of Compact Discs, which declined 23 per cent globally between 2000 to 2006.

To get an idea of the size of the problem, Eric Garland of Web consultants Big Champagne estimates that more than 1 billion digital tracks are illegally traded for free each month. By comparison, Apple Inc.'s iTunes Music Store, which has more than 70 per cent of legal digital music sales in the United States, has sold only a bit more than 2 billion songs since its launch in 2003.

The problem is so-called peer to peer (P2P) networks such as Gnutella and BitTorrent that link millions of personal computers and allow anonymous users to exchange digital music files for free over the Internet. Since the music industry started winning lawsuits against individuals in the last few years, the growth in the number of people using illegal file-sharing software has slowed significantly, but nonetheless it is still growing.

Russ Crupnick, an analyst at consumer research group NPD, said the number of U.S. house holds engaged in P2P over the last year rose 7 per cent, while the number of illegal downloads were up by 24 per cent. "P2P remains an unacceptable problem," said Mitch Bainwol, president of the Recording Industry Association of America. "The folks engaged in the practice are doing more of it.

The Recording Industry Association of America (RIAA) succeeded in closing some companies behind file-swapping, such as Grokster and KaZaa starting in 2005. But shutting down the companies that marketed the applications does not always kill the network. "If you've got the software you can still file-share. The rulings just means you can't distribute it anymore," said Wayne Rosso, a former chief executive of Grokster.

Five facts about digital downloading

•Sales of compact discs have fallen by more than 23 per cent between 2000 and 2006 according to the global music trade body IFPI.

•Napster was the first major peer-to-peer file sharing network. It was founded by Shawn Fanning in 1999 and shut down after legal action by the music industry in 2001.

•The Recording Industry Association of America has successfully shuttered or reached agreements with BearShare, eDonkey, Grokster and Kazaa since 2005.

•Apple's iTunes Music Store is the world's biggest digital music outlet and has sold more than 2 billion songs since its 2003 launch.

•More than 1 billion songs are swapped for free every month on file swapping networks, according to Web consultants Big Champagne.