Australia's buoyant recorded music industry still has a mountain to climb if it is to convert file-sharers to legitimate digital music offerings, a new research paper reveals.

According to the findings of a new report, entitled "CCi Digital Futures 2010: The Internet and Australia," more Australians are using the Net than ever before and more are buying music online. But in a headache for a market that reported 4.3% growth last year according to IFPI's separate "Recording Industry In Numbers, more netsurfers are turning to file-sharing services.

The "overwhelming majority" of Australians have become regular Internet users, many of whom are now connected with broadband. However, more than a quarter of all the country's Internet users admitted to using file-sharing services like BitTorrent, the report disclosed.

Researchers interviewed 1,000 Australians last year on their Internet usage and their online habits.

They found that 27.8% of Australia's Internet users sourced music from illicit sites, up from the 23.6% documented in an earlier, 2007 study. The new study found 12.2% did so on a weekly basis, down only slightly from 12.2% in 2009. File-sharers typically cited "free," "simple" and "practical to use" for their habits.

Some 30% of respondents said that being able to download music from the Internet had decreased the amount of music they bought, a figure relatively unchanged from the 2007 study. In 2009, nearly a quarter of those said it had decreased their buying-drive "a lot," up from 19.5% in 2007.

Meanwhile, the proportion of file-sharers who said that they now buy more music fell to 26.9% from 32.9%. It's an outcome that will prove frustrating to an industry which is desperate to see digital music channels outpace the decline in physical formats.

The report isn't all gloom. One of the rays of light for industry execs comes in the apparent surge of interest for buying music from legitimate channels. From 2007 to 2009, the proportion of users who usually bought online doubled to 19.3% from 8.1%. And in a sign of the staying power for the CD, more than 80% of Internet users said they still usually buy their music from a "bricks and mortar" store.

The 59-page study is the Australian component of the World Internet Project, and was conducted by the ARC Centre for Excellent for Creative Industries and Innovation at Swinburne University of Technology.