In 2007, sales of CD albums fell by 10 per cent, while the number of tracks downloaded from the internet rose by more than a third.
Given the pervasiveness of digital music players, it is perhaps surprising that the download market is not growing even more quickly.
However, the confusion over various file formats, music quality and the legality of the different sites has so far kept its growth relatively muted.
While more than two-thirds of MP3 players are iPods, many of the largest sites do not yet offer downloads that are compatible with Apple software.
This has prevented the download market from being as competitive as it should be. As a result, the price of downloading music from several of the largest sites is still almost as high as buying a CD.
Napster, one of the largest download sites, currently offers only WMA files, which means that it's no good for downloading to iPods.
However, Napster hopes to be able to offer its entire catalogue in MP3 format by the end of the year.
The market leader, iTunes, meanwhile, provides its tracks in AAC (Advanced Audio Coding) and its tracks are not compatible with any digital music players apart from the iPod. iTunes will convert WMA files to AAC for iPod users.
Before you part with any cash for downloading music, make sure you're downloading it in a format that is compatible with both your music player and your computer software.
There are many different ways to get your hands on music from the internet - most of which are not legal.
If you're managing to pick up A-list artists for free, then you can be pretty sure that it's not legal. However, there are a few grey areas.
Russian music-download sites, such as mp3sparks.com and goldenmp3.ru, allow you to download chart albums for about $3 - and if you go to the FAQ section on their websites, you'll find a statement saying that they are licensed by the Russia Multimedia and Internet Society (RMIS) and pay licence fees for all music that is sold. This much is true.
However, the RMIS does not redistribute these royalties to the music publishers and record labels, who consequently and understandably do not recognise the Russian regulators and claim that they are being cheated out of millions by them.
Dan Nash of Napster warns that it may not be legal for consumers to download from these sites.
And if you are going to use one of them, examine your conscience first.
Independent record labels depend on the money they earn from their successful artists.
If you use the Russian sites to buy music, you're helping put the indie music world out of business.
One area of the music download business that's less legally fuzzy is the file-sharing market, which the music industry insists is completely illegal.
Nash says regular consumers are occasionally fined for using these sites and the record labels have been busy pursuing legal suits against the websites (although without much success, as it's their users who are acting illegally, not the sites).
All of the sites mentioned below are fully legal (perhaps with the exception of MP3sparks.com), and there are a number of places where you can download music for free.
Indie labels often allow sites to offer some tracks for free to promote their lesser-known bands.
But if you like what you hear, make sure you find a site to download and pay for the full album.
Who can you trust?
There are many established download sites. However, there are also dozens of sites that are less trustworthy.
Some file-sharing sites will try to make themselves sound like the new Napster, or iTunes, while other sites will even insist on you signing up to financial products and other promotions before you can register.
Generally, the more hoops you're asked to jump through, the more wary you should be. Be sure to read all the small print before you sign up to a website.
Once you've handed over your bank details, many will try to hit you for monthly debits.
A question of quality
Music download sites can vary dramatically when it comes to sound quality, so make sure you know what you're buying before you close the deal.
You should be looking for a minimum of 128kbps, but preferably 196Kbps.
Some sites offer downloads at 320kbps, which is as good as you will get from the CD.
It's also worth watching out for whether sites have DRM (digital rights management) attached to their tracks.
Sites such as iTunes and 7digital use these, meaning that once you've paid for a track, you're limited in the number of times you can download it and you may be restricted if you try to copy it or even burn it on to a CD.
The Russian sites are by far the cheapest, but we don't feel we can recommend that you use them.
Of the rest, Play.com has been stealing a march on its competitors, charging under $2 for many chart tracks and less than $20 for an album.
7digital has a few good offers - such as selected new albums for just R75 - while Wippit's prices start from about $1 a track (although its library is limited).
If you don't have an iPod, Napster's unlimited downloads for around $40 a month is a great deal for the real music enthusiast.
Unlike most of its competitors, iTunes offers almost any music you can think of.
Napster offers downloads only in WMA format, but it plans to make all its catalogue available in MP3 later this year. Download quality is high, at 192Kbps.
Allows you to listen to (stream) all the latest music for free and also offers some free downloads in MP3 format from independent labels.
Offers only a limited selection of music from independent record labels in MP3 format. At 320Kbps, quality is excellent.
Mainly free downloads available in MP3 or WMA formats. Allows you to build playlists of new music.
- THE INDEPENDENT