Apple's iTunes is continuing to dominate the online music market in the face of increasing competition.

According to research from the NPD Group, some 70 per cent of music files downloaded legally between December 2003 and July 2004 were from iTunes.

The report added that Napster's share for the same time period was 11 per cent, while MusicMatch and RealNetworks each reached a six per cent share.

The number of consumers paying for music downloads reached a peak of 1.3 million in April, but Russ Crupnick, vice president of the NPD Group, said that at this stage of the business who has what is less important than developing the overall market.

"It is not so much about building share as it is about creating demand for paid downloads universally," he said in a statement.

"The overriding challenge for paid music download services is to first make the concept enticing to a wider audience, and then to build loyalties to a specific service."

Since iTunes launched around 18 months ago, paid music download services have been hoping for huge increases in paying customers, but users have actually declined to about one million per month.

The downturn coincided with the end of promotional periods offered by several of these services, according to NPD, in which consumers were offered trial price incentives.

"Building demand for paid music download services requires even greater investment in consumer promotion, as well as broadening partnerships with traditional music retailers and consumer goods companies," said Crupnick.

"We have seen that promotion works but it has had a short-term effect so far, which is typical for traditional consumer goods. The trick is in phasing promotions so that there is a cumulative positive effect on the target market."

NPD discovered that over the past 12 months, households with a member using a peer-to-peer site to download music for free or illegally has ranged from 4.7 million to 6.4 million per month, although the research noted generally higher levels since March.