UK music industry revenue fell just 3.4% last year to £795m as the steady decline in the popularity of CDs was offset by a 25% increase in income from digital downloads and subscription services such as Spotify and Napster.

Trade body the BPI said that the 14% year-on-year decline in physical sales of CDs and DVDs in 2011 to £513m – singles sales plummeted 33%, albums fell 14% – was increasingly being countered by a surge in digital income.

Digital revenue increased 24.7% year on year to £282m, with the BPI pointing out that growth in the sector is now offsetting two-thirds of the decline in sales of physical DVDs and CDs.

Total digital income – from online downloads, subscription services from the likes of Spotify and eMusic, ad-funded music services and mobile – now accounts for 35% of the total UK music market.

A breakdown of total UK digital music revenues show that albums accounted for £118m, up 43% year on year, while single tracks grew 11% to £120m.

Income from digital subscription services grew an impressive 47.5% year on year – albeit partly because it started at such a low base – to £24m.

Advertising-supported services from companies including We7, Last.fm and YouTube, saw revenue drop by 1.4% year on year to £10.7m.

A year ago, music executives were concerned about a dramatic slowdown in growth of digital music sales, which plummeted from a 47% year-on-year increase in 2009 to 20% in 2010. However, the 2011 figures show that growth has once again increased to 24.7%.

"It is highly encouraging for the long term prospects of the industry that the pace of digital growth continues to accelerate," said the BPI chief executive, Geoff Taylor.

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