Faster broadband allows 200 MP3s to be downloaded in just five minutes
Around seven million people in the UK are involved in illegal downloads, costing the economy tens of billions of pounds, government advisers say.
Researchers found 1.3m people using one file-sharing network on one weekday and estimated that over a year they had free access to material worth £12bn.
The Strategic Advisory Board for Intellectual Property (SABIP) warned it may be hard to change attitudes.
The government says work must be done internationally to tackle the problem.
Intellectual Property Minister David Lammy said the report put into context the impact illegal downloads had on copyright industries and the UK economy as a whole.
But he added: "This is not an issue confined by national boundaries and I am sure that other [EU] member states and their copyright industries will find this report of use in the development of policy."
HAVE YOUR SAY
Many people do not even realise that what they are doing is illegal
Ralph Cook, Barking, UK
An alliance of nine UK bodies representing the creative industries recently joined trades unions in calling on the government to force internet service providers to cut off persistent illegal file-sharers.
They said more than half of net traffic in the UK was illegal content.
The Open Rights Group - a UK based group that works on digital rights and freedoms - said the study illustrated the sheer size of the market.
"We need a compelling 'all you can eat' music service to reduce illicit file sharing," the groups executive director, Jim Killock, told the BBC.
"But [we need] to remember that extreme enforcement measures would probably be very unfair and make people angry."
Internet service providers say it is not their job to police the web.
The latest report for the SABIP, said the new generation of broadband access at 50Mbps could deliver 200 MP3 files in five minutes, a DVD in three and the complete digitised works of Charles Dickens in less than 10.
It said the seven million people who access files illegally could not all be students and that many of them were uncertain about what was illegal.
The fact that so much on the internet is free only added to the confusion, it said.
Dame Lynne Brindley, SABIP Board member, said: "This report gives us some baseline evidence from which we can develop a clear research strategy to support policy development in this fast moving area."