Music CDs copied and sold illegally last year created a $4.6 billion black market that accounted for a third of all the discs sold worldwide, an industry group reported Thursday.

A total of 1.2 billion pirate music discs were sold both physically and on the Internet in 2004, accounting for 34 percent of all the CDs sold, the International Federation of the Phonographic Industry said in its annual Commercial Piracy report.

While the number of pirate CDs remains high, the 2 percent growth in illegal sales from 2003 marked the lowest level in five years, due in part to stepped up enforcement efforts in Mexico, Brazil, Hong Kong, Paraguay and Spain, the IFPI said. Seizures of commercial CD burning equipment last year were twice the levels of 2003.

The IFPI released its report in Spain, which the group said was Europe's "most serious piracy-problem country." Piracy in the country has shrunk the legitimate market by a third in the last three years, the IFPI said.

Other countries named in the IFPI report as having "unacceptable levels" of piracy and where more government action is needed included Brazil, China, India, Indonesia, Mexico, Pakistan, Paraguay, Russia and the Ukraine.

Sales of pirate music exceeded the legitimate market in a record 31 countries, including, for the first time, in Chile, Czech Republic, Greece, India and Turkey.