Researchers in Victoria believe they have discovered the key to wiping out illegal music downloads.

While music fans flocked to Geelong, near Melbourne, on Wednesday for a glimpse of pop queen Kylie Minogue, across town local researchers were launching a new watermarking technology that they believe will help stop illegal downloads.

Researchers at Deakin University in Geelong and Aizu University in Japan have developed a watermarking process, which provides a breadcrumb trail back to the source of illegal downloading.

The lead researcher on the project, Associate Professor Yong Xiang, said the technology breakthrough worked by hiding watermark data, such as the publisher's name, signature, logo, ID number and other user information into the actual multimedia object, without changing the quality of the product.

"What we did was to enable music file owners and relevant law enforcement authorities to use a secret key to extract the watermark data from the watermarked multimedia object," Professor Xiang said.

"Watermarking technology can be used to prove copyright ownership, trace the source of illegal distribution and verify the authenticity of files."

Almost all Australian music downloads illegal

Professor Yong Xiang said 95 per cent of music downloads in Australia were illegal, with about 2.8 million Australian using illegal file sharing networks.

"Improvements to technology have been enormously positive for the music industry in that artists' music is now more readily available to consumers all around the world, but unfortunately advances in locking such music away from illegal pirates has not kept up at the same speed as its accessibility," Professor Xiang said.

He said the researchers would now look for a corporate sponsor to make the technology a reality.

The head of Deakin's School of Information Technology, Professor Wanlei Zhou, said technology alone cannot stop illegal downloading.

"There are many ways you can solve the problem, for example by educating people, by using incentives, with legal framework and also with the technology to support the issue," Professor Zhou said.

Music promoter Michael Gudinski said illegal downloading had been a "bugbear" of the music industry for a long time.

"Piracy has just been rampant for years, even more so in Asian countries, and anything that's a possible cure for that would be a welcome relief for artists, composers, writers and certainly record companies," Mr Gudinski said.

"Artists deserve protection and it's been an area of great frustration, so if anything that's come out of Deakin becomes reality, I'd be not just proud of Deakin but proud of Australia."

The research will be published in the latest edition of IEEE/ACM Transactions on Audio, Speech, and Language Processing.