After showing encouraging signs in 2005, the French recorded music market hit the downward slope in 2006.

According to initial estimates, unveiled Jan. 16 by national industry trade body SNEP, the wholesale value of the physical market in 2006 dropped to around €800 million ($1.035 billion), down 14% from 2005. The volume of the market last year was 27% down to 100 million units.

The loss is far from being compensated by digital sales, warns SNEP. Digital formats registered a 40% year-on-year rise in value to €40-€45 million ($51-$58 million).

At retail, estimated physical sales dropped 12% in value to €1.3 billion ($1.68 billion) and 20% in volume to 90 million units.

"We still consider the fact that music is available for free [on P2P networks] is pushing consumers to spend their money in other entertainment goods", SNEP director general Hervé Rony tells "This explains the downturn in physical sales and the relatively weak growth on digital."

While the online affiliates of leading French retailers Fnac and Virgin this week began selling a broad catalog without digital rights management, Rony remains sceptical that such an initiative will shake-up the market. He says the key problem remains in the existence of a "free offer".

Regardless, he adds, "it should not be the record companies that should try and solve the interoperability issues, but the DRM-manufacturers and the download platforms."

SNEP will unveil final, detailed figures on the French market on Monday (Jan. 22) during a presentation at the MIDEM trade fair in Cannes.