Swedish music service Spotify generates larger revenues for the record companies than Apple’s music store iTunes.

After a decade of falling sales of records, the Swedish music industry is once again headed for brighter times as more consumers turn to legal alternatives and revenues start to increase.

Last year 14.7 million albums were sold in Sweden, down a third from 22.1 million albums ten years ago. The first half of this year, though, sales of physical records were up 30 percent and revenues 9 percent, according to the Swedish Recording Industry Association. The largest increase was, not surprisingly, in digital sales that swelled 57 percent.

There are two factors behind the rapid increase in legal sales. First; new Swedish legislation, allowing record- and film companies to track down people suspected of illegal file share, has resulted in a 30 percent fall in the country's total web traffic as fewer use illegal services such as The Pirate Bay.

Secondly; the legal alternatives has become far better. Swedish Spotify, a service legally offering instant access to millions of tracks, has more than one million members in Sweden and is promptly spreading across the globe.

According to record label executives, Spotify - launched last year – has already become more important than Apple’s music store iTunes.

“iTunes is going really well, but Spotify is growing rapidly. There are signs that a large number of illegal downloaders are turning to Spotify”, said Mark Dennis, head of digital sales at Sony in Sweden, to the TT news wire.

Also in terms of revenues Spotify has overtaken iTunes.

“In five months from the launch Spotify became our largest digital source of income and so passed by iTunes”, Per Sundin, head of Universal in Sweden, told the newswire. “It’s a fantastic development explained by the fact that Spotify really has exploded”.

Last month Spotify submitted an application to Apple's iTunes App Store. If approved, iPhone users would be allowed to stream Spotify playlists on their handsets. The investors hope Spotify will attract more paying users if Apple allows the service to be used on iPhone, Financial Times writes.

It's also planning a US roll out, potentially backed up with $50 millions from a group of high-profile investors including Hong Kong billionaire Li Ka-shing's charitable foundation.

The Swedish music company has more than six million across Europe. Record labels such as Sony BMG, Universal Music, Warner Music, EMI and Merlin owns a total of 18 percent of Spotify.