They are the record companies' bogeyman: the 15-year-old in their bedroom ripping off a star's latest album and sharing it with their friends has been blamed for bringing an industry to its knees.

But new research shows that the number of teenagers illegally sharing music has fallen dramatically in the past year.

The survey of 1,000 fans also shows that many14 to 18 year olds are now streaming music regularly online using services such as YouTube and Spotify.

At the same time less than a third of teenagers are now illegally downloading music, the survey suggests. In January this year 26% of 14 to 18 year olds admitted filesharing at least once a month compared with 42% in December 2007.

The research revealed that many teenagers (65%) are streaming music regularly, with more 14 to 18 year olds (31%) listening to streamed music on their computer every day compared with music fans overall (18%).

The picture may be more complex than a simple shift from filesharing to streaming, with people sharing music in new ways such as via bluetooth technology, on blogs, and through copying, also known as ripping content from friends' MP3 devices.

Even though users of streaming services are not necessarily buying more music, the industry benefits by learning more about fans' tastes. Steve Purdham, CEO and founder of We7, a music streaming service and download store, said: "They may not buy an album, though they have that opportunity, but you can sell them tour tickets and a T-shirt of their favourite band."

We7 has 2 million users a month and works with artists including Florence and the Machine and Jarvis Cocker to stream new albums before they are available to buy.

Paul Brindley, CEO of Music Ally, which carried out the survey with media and technology research company, The Leading Question, said: "These figures challenge the idea that filesharing will just continue to grow. While we don't think for a second that it shows the war against piracy is won, it does at least suggest that there is encouraging news for the music industry."

The government has pledged tougher measures to crack down on illegal filesharing, including sending warning letters to people making illegal downloads of music and films. Repeat offenders could also have their internet connections slowed down.

Music fan Dominique Wakefield, 24, said she had stopped downloading music because of concern that it would infect her computer. "I didn't even realise it was illegal for a long time, until I heard that the government were trying to stop it. That did put me off, but one of the big reasons I stopped doing it was because I would get viruses, more pop ups on my computer. While I was at uni I started listening to streamed music using MySpace. Bands would be friends with other bands and it was a great way of discovering new music. I don't really feel the need to own all that music, I know it's always there.

"I still buy the occasional CD, and sometimes use iTunes. If I find myself loving a whole album and listening to it again and again, then I will buy it. But it has to be quite special."

The rise of streaming sites is far from assured. Daniel Ek, the founder of Spotify – an ad-funded streaming site which also offers a premium subscription model – recently admitted that the service, which launched in October 2008 and now has 2 million registered users, was not on target to make its revenue forecasts.

We7, which launched six months ago and relies on selling adverts of between three to seven seconds before each song, is yet to break even. But Jim Butcher, a spokesman for Spotify, said the company was confident that the quality of the product would win over users, premium subscribers and advertisers. "One of the fundamental aims of Spotify was to develop a service that was better than piracy," he said. "We've always maintained that music fans don't want to fileshare illegally but they do want to have everything at their fingertips instantly."

Legal digital sales are also seeing an unprecedented boom, although sales are far from making up from the shortfall created by the collapse of the physical market. Digital singles were up 41.5% in 2008, while physical singles sales plunged 43.5%, according to the BPI. Last year three albums – Coldplay's Viva La Vida, Kings of Leon's Only By Night and Duffy's Rockferry – sold more than 100,000 digital copies, and the impact of digital is nowhere more apparent than in the UK singles top 40, where Michael Jackson has 12 posthumous entries in the current chart.

The new research – which involved 1,000 face-to-face interviews and a series of focus groups – also revealed that a fraction more music fans are regularly buying single track downloads (19%) than filesharing single tracks (17%).

Geoff Taylor, CEO of the BPI called the figures "absolutely encouraging". He said: "The industry has worked hard to licence new services, they are great music discovery tools and a new way for artists to get paid and drive new sales."

Francis Keeling, vice president of digital at Universal, welcomed the news but said streaming had to be combined with new services, such as the company's new deal with Virgin Media which will offer broadband users unlimited downloads for a monthly fee. "We are confident that the numerous legal alternatives to filesharing will result in a long term reduction in piracy," he said.