Music sales worldwide are expected to plunge by about 11 per cent this year, making 2007 the worst year for the recording industry for more than a quarter of a century.

At Easter, industry bosses forecast a 4-8 per cent decline in revenues, but at least one of the four biggest companies is preparing for an 11 per cent tumble as the shift to digital starts to make its impact felt.

Retail sales, for which figures have been compiled since 1969, the year that the Beatles’ Abbey Road album was released, have never fallen by so much, although there was a 9 per cent decline in 1982 before the arrival of the compact disc.

Wholesale revenues, for which figures date back only a decade, have never fallen by more than 7 per cent in a year. That was in 2002 and 2003 when piracy and free – and illegal – sharing of recordings via internet sites such as Napster were rampant.

CD sales were down by about 20 per cent in the first half of this year in the US, the world’s largest music market, according to data released by Soundscan last week. Even allowing for growth in digital downloads, total sales fell by 9.3 per cent. The calculations are based on ten single downloads counting as one album.

The problem began in January after a surge in sales of digital music players over Christmas. Apple’s dominant iTunes online record store allows listeners to buy two or three single tracks in preference to a whole album, depressing revenues.

Piracy also remains widespread, as is listening to songs and watching music videos – legitimately – without paying on internet sites such as YouTube.

Rich Greenfield, an analyst with Pali Research, has predicted a 10 per cent decline in industry revenues in 2007, and again next year because, despite the growth in digital, CDs still represent about 85 per cent of the market. Another Christmas of digital music-player buying is likely to have a similar effect. “Explain to me why the market is going to get any better,” Mr Greenfield said.

A similar picture is emerging in Britain, the number three market after Japan. This week official data are expected to show that CD sales are down 10 per cent, or 6.5 million. A near-doubling of digital music sales to two million softens the overall decline only partially.

On the plus side for the music industry, some revenues – such as income from sales to mobile phones, from radio playback and a little from touring – are growing and are not included in the figures. Music companies are also preparing to promote CDs and their back catalogue more aggressively before Christmas.

Analysis

Amy Winehouse’s forlorn Back to Black sums up the state of the music sales: while festivals are jammed and iPods full, music sales are dismal. Some predict an 11 per cent decline in sales this year, which would make it the worst year since records began.

Christina Aguilera’s self-titled album is this decade’s bestselling album in the US, at 14 million copies. It’s number 26 on the all-time chart.

It is too easy legally to listen to songs on YouTube or MySpace, and sites such as iTunes have made it possible to buy the three best songs of an album rather than the lot.

Once fans go digital, they spend less. In the US, CD volumes are down 19 per cent so far this year.

There are some bright spots. Take That’s Beautiful World sold a million copies in 28 days in Britain. Universal Music, the market leader, says that its revenues are up 14 per cent this year in the UK.

There are new revenues, such as a cut of artist touring and merchandising. EMI has a piece of Robbie Williams. Mobile sales are not included in the data: they amounted to about $50 million at Warner Music between January and March. But CDs are still 85 per cent of the market and some companies do not expect to recover until 2010 or 2011.

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