Canadian recording sales continued their decline in 2006 and digital sales aren't making up the shortfall, according to the Canadian Recording Industry Association.

Sales of CDs, music DVDs and other physical music formats in Canada fell 12 per cent in 2006, CRIA said in a statement released Thursday.

And then things got worse — first quarter sales in 2007 were down 35 per cent, according to industry statistics.

Canadian recording sales fell from $609.2 million in 2005 to $536 million in 2006. Unit sales dropped by seven per cent.

Sales in the first quarter of 2007 were $68.7 million, down from $105.6 million a year earlier and unit sales fell 30 per cent.

CRIA lays blame for the drop in sales, and a decline in industry profitability, on illegal downloading.

There were just 20 million songs downloaded legally in Canada in 2006, compared with 1.3 billion illegal downloads, according to research from Pollara, a market research firm.

Illegal internet file-swapping and counterfeit CDs and DVDs are more common in Canada than the U.S. because of relatively lax laws and enforcement against piracy, CRIA said.

In the U.S., where copyright laws are stronger and there has been more enforcement, legal downloads represent 17 per cent of recording sales. In Canada, legal downloads account for six per cent of the market.

Canadian recording companies have reported a steady decline in sales since widespread file-swapping began in 1999.

CRIA president Graham Henderson called the sharp decline in this year's recording sales a "wake-up call" for the federal government.

"We've experienced sizable short-term drops before, but nothing compares to the drastic numbers we're seeing so far this year," he said.

Artists' income also hit

CRIA wants Canada to reform its outdated copyright law in line with the World Intellectual Property Organization treaties.

The income of Canadian recording artists is also taking a beating, according to Terry Canham, an accountant who acts for many Canadian musicians.

"Any suggestion that Canadian artists have entered into some kind of golden digital age is dangerously wrong and does a disservice to the artistic community," he said.

CRIA is a non-profit trade organization and lobby group representing the Canadian recording industry. Its membership includes the Canadian arms of major international companies EMI, Sony BMG, Universal and Warner.

Six independent Canadian recording labels broke from CRIA last year over its policies that would redefine what could be considered Canadian content on commercial radio.