Record firms want to make more money from artists with tours, merchandise and sponsorship
UK music firms are earning a growing share of revenues from activities other than the selling of CDs and digital downloads, industry figures show.
Activities such as licensing songs, merchandising and tours, helped boost sales by 13.8% to £122m in 2007.
The BPI - the British record industry body - said these deals now account for 11.4% of the income of firms.
But CDs and digital music sales still represented the lions' share of industry income, it added.
Online & retail sales = £1.4bn
Digital formats = 8.6% of total sales
Income from adverts, films & games up 20%
Income from "360 degree deals" up 16.2%
Record companies made £1.4bn from music sales via retailers, on the high street and online, last year.
The internet is the driving the changes in music buying habits.
Digital formats accounted for 85% of all Top 20 single sales and made up 8.6% of total UK record sales.
Since online music stores entered the mainstream in 2004, consumers have bought more than 200 million downloads, the BPI said.
"360 degree deals"
But it believes record firms will make increasingly more money from activities such as licensing its music for commercial use, such as TV adverts, films and games.
Companies are also pinning their hopes on so-called "360 degree deals".
They see merchandising, touring, use of artists' logos and sponsorship as potential money-spinners.
Today's record business is unrecognisable to that of five years ago
Geoff Taylor, chief executive, BPI
The BPI's chief executive Geoff Taylor said: "As consumption patterns change, music companies are finding new ways to recoup the huge investments they make in music.
"They are using new technology to find a new audience and offer consumers more choice. Today's record business is unrecognisable to that of five years ago, he added."
But the industry faces challenging times.
The International Federation of the Phonographic Industry (IFPI) said that in 2007 digital downloads rose by 40%, but the industry still makes losses because of piracy.
EMI, which has Coldplay and Kylie Minogue on its books, is in the process of cutting thousands of jobs to reduce costs by £200m a year.
Private equity owner Guy Hands, who bought EMI last year, has said the industry is battling with falling CD sales and a switch to internet downloads.