The German recorded music market continued to contract in 2006. The national record business declined by 2.4% to a retail value of €1.706 billion ($2.27 billion), the German IFPI reported on Thursday. The figure includes VAT at 16%.

Germany's recorded music market has been on a downward trend since 1998, during which time it has far seen a cumulative decline of more than 50%, according to the trade association.

The market shifted 186 million physical units -- comprising CDs, DVDs, LPs and MCs -- last year, down 2.7 million units from the previous year.

Whereas sales of CD albums actually rose slightly to 149.5 million units, and sales of DVD videos improved 10.1% to 14.2 million, the general drop is primarily attributed to losses in CD singles, vinyl LPs, MC and VHS formats.

Sales of CD singles were down 11% to 15.9 million units. Over the past ten years, the German singles market has shrunk by a cumulative 71%.

"I believe that this negative trend will continue in 2007," comments Frank Briegmann, president and CEO Universal Music Germany and member of the IFPI Germany board. He notes, "We continue to have a strong competition in the market."

The CD format -- covering albums and singles - accounted for 85% of sales, followed by music videos with 9%.

The German figures collated data reported by its national members, which represent 86% of the entire market. And for the first time, data was contributed by market research institute GfK in Nuremberg.

According to the market figures, downloaded and mobile music together accounted for just 5% of sales, but the format is growing steadily, the IFPI says. Sales of digital tracks rose by 28% to 25.2 million units, while digital albums soared 36% to 1.9 million units. Digital formats generated revenue of €42 million ($56 million), up 40%

The IFPI has accounted for music videos in its data since 2002, and downloaded music files since 2004.

Meanwhile, the sale of CDs via the Internet is growing in importance, the IFPI notes. At 17.9% of sales (vs 16.8% in 2006), the Internet has become the second most important retail channel behind the consumer electronics retail chains, which account for 30% (vs 30.8% in 2006).

And the share of Germany's national productions on the Media Control top 100 sales charts has widened. Locally produced albums accounted for 38.1% of chart positions in 2006, up from 35.3% in 2005. Meanwhile, German-produced singles contributing 53.2%, up from 51.4% last time.

During the year, Germany leap-frogged France into fourth place among the biggest market shares in the world, behind the United States, Japan and the United Kingdom.