One of every three compact discs sold in the world last year was pirated, with sales totaling $4.6 billion, an industry group said Thursday.

In a record 31 countries, fake recordings now outsell legal ones, the International Federation of Phonographic Industries (search) said in its annual report.

The bootleg industry is growing Latin America, India, the Middle East and eastern Europe, it said, although around the world some countries are cracking down on copyright theft by shutting down illegal recording facilities. A record number of them — with annual capacity for 380 million discs — were knocked out of action last year, the study said.

The London-based federation said it was releasing the report in Madrid because Spain is Europe's worst culprit when it comes to pirating music. In Spain, bootleggers selling pirated CDs and DVDs are common sights on the street.

The federation named Spain and nine other countries as priorities: Brazil, China, India, Indonesia, Mexico, Pakistan, Paraguay, Russia and Ukraine.

"The music industry fights piracy because if it did not, the music industry would quite simply not exist," IFPI chairman John Kennedy wrote in the report.

It called intellectual property "a jewel worth protecting," saying copyright industries account for 5 percent of GDP of the U.S. and European economies. Piracy jeopardizes jobs, economic growth and innovation and it saps tax revenue, the group said.

"It is no longer acceptable for governments and individuals to turn a blind eye or to regard piracy as merely a small irritation to society," he added.

The value of the world pirate market for music is equal to the legitimate markets of Britain, the Netherlands and Spain combined, the report said.

Globally, it said 1.2 billion pirated music discs were sold in 2004, 34 percent of all sales.

Musical piracy (search) grew 2 percent in 2004, the smallest increase in five years. But the number of pirated discs is still double that sold in 2000, the report said.

In Latin America, the market for legally recorded music is two-fifths of what it was in 1997. In Paraguay, for instance, 99 percent of CDs sold are bootleg, the study said.

In Asia, excluding Japan, the legal market is half what it was in 1997. China is by far the world's largest pirate market, with an 85 percent bootleg rate, the IFPI added.