If you played a word association game with the average person in the street on the topic of Online Music, then one of the first answers would almost certainly be “illegal filesharing”.

The web has long been cited as plague for the music industry, eroding the traditional models, with music stores, record labels and bands increasingly out of pocket.

The friction between online and offline was summed up nearly by last years’ conflict between music royalty collection body PRS For Music and YouTube, where the latter blocked all music videos on its site after its claimed PRS was asking for too much per play.

Although this was eventually resolved, the web continued to be viewed as a platform that has yet to fully compensate the artists whose content is shared across it.

But that might just be changing. Today PRS for Music revealed royalties from digital music are growing at a faster rate than the decline in revenues from physical music sales for the first time.

Digital revenues grew by 72.7% (£12.8m) to £30.4m in 2009 compared to an £8.7m fall in CD and DVD revenues through the year. Total revenues grew by 2.6%, from £608.3m in 2008 to £623m last year.

The main increase for online revenues will be sales through the major distribution channels like iTunes, but it will provide optimism to other offerings such as the Spotifys and MySpace Musics out there that their models can deliver for the labels in the long term.

Robert Ashcroft, CEO of PRS, rightly said there was still a long way to go for the digital music industry, but it’s good to see online music services get positive headlines.

Image via TTDesign