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EMI is crediting downloads for a 13 per cent increase in profits despite falling sales of physical products.

The record giant, which only started offering music over the internet in 2003, and has Coldplay, Robbie Williams and Gorillaz on its books, increased profits to £159m on revenues which grew at just 2.1 per cent to £2.1bn.

Group digital sales jumped from £46.9m to £112.1m and group operating margin grew by almost a percentage point to 12 per cent in the year ended 31 March 2006. Physical sales fell 5.3 per cent.

EMI Group chairman Eric Nicoli said: "Digital revenues continue to grow at a very rapid pace in both divisions as we aggressively pursue new digital uses and demand for our exclusive music content. In 2005, Coldplay's latest album release, X&Y, was not only the industry's biggest selling album globally but also the largest selling digital album release in the US."

Digital sales in the US almost tripled over the year with mobile revenues growing fastest - increasing by a factor of nine, but internet downloads still make up 70 per cent of the market in the US.

In the UK and Ireland, physical sales fell 4.9 per cent but digital sales grew by 170 per cent. EMI blamed weak sales of compilations, especially over Christmas, for the decline.

Continental Europe, as EMI calls it, saw total industry sales fall 3.7 per cent. Digital sales in the region grew by 245 per cent and mobile revenues are a larger proportion of total sales than in the UK or US.

Physical and digital sales in Japan grew by six per cent in the year.

Looking forward, EMI predicted that digital music will make up 25 per cent of total global music sales by 2010.

More from EMI here. ®

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