Music lovers spent a record £2.4bn on streaming subscriptions and physical music last year as the UK music industry finally recovers from the digital revolution that ushered in rampant online piracy and the slow death of the CD.

Subscriptions to streaming services such as Spotify, Amazon and Apple, and the revival in the popularity of vinyl, with sales increasing for 17 consecutive years, fuelled a 7.4% rise in music revenues to £2.38bn last year, according to the Entertainment Retailers Association (ERA).

The music industry has taken decades to adapt and recover from the advent of the digital era, with billions wiped off the value of the UK industry. Revenues reached above the previous all-time high of £2.2bn in 2001.

“Music is back – thanks to streaming and the vinyl revival,” said Kim Bayley, the chief executive of the ERA. “For decades it was new release activity which drove most revenues. Digital services and retailers have become the drivers of the market.”

Consumer spending on streaming subscriptions grew at 7.8% to top £2bn for the first time last year.

Spending on physical formats – CDs, vinyl and other formats such as cassettes – increased by 6.2% to £330m.

Vinyl album sales outpaced the market at 10.5% to £196m, while CD album revenues remained flat at £126m.

However, the figures are not adjusted for inflation, meaning total UK spending on music is still likely to be below the level recorded in 2001.

The ERA said that total album sales hit 201.4m – a figure that includes physical sales and a conversion of streams into equivalent albums – led by Taylor Swift’s The Tortured Poets Department at 783,820 units.

The previous annual record for album sales was 172m set in 2004; however, this was based purely on physical sales.

Last week, the industry body the British Phonographic Institute published figures on the volume of physical sales showing vinyl up 9% to 6.7m units.

That report showed that CD sales declined by only 300,000 to 10.5m units and with a few hundred thousand sales of other formats, such as cassettes, total sales of physical recorded music showed an increase for the first time in two decades, to 17.4m.

While spend on streaming accounts for about 85% of total UK music revenue, and 88% of the albums bought, the ERA does not expect the future to become digital-only.

“We continue to believe that digital and physical channels are complementary and vital for the health of the entertainment market overall,” Bayley said.

The revival of the music industry through subscription services comes against the backdrop of continued complaints about remuneration for musicians and big-name acts seeking increased revenue from money-spinning tours.

Tom Gray, the chair of the UK songwriters’ body the Ivors Academy and a member of the band Gomez, said: “A record-breaking year for whom? Music creators are not seeing a fair share of this success.

“We urgently need to rethink how streaming revenues are distributed. The whole industry can see the potential harms of AI on the horizon and yet we haven’t even got our own house in order.”

Naomi Pohl, the general secretary of the Musicians’ Union, said: “Sadly, professional musicians, artists and songwriters are not enjoying the boom represented by these figures …

“They are facing multiple problems including the high cost of living and touring, stagnating public arts funding, problems touring in the EU post-Brexit and, crucially, they are not receiving their fair share of streaming revenue.”

The ERA report also looks at the performance of the digital video market, which is led by Netflix, Disney+ and Amazon’s Prime Video, and the gaming market.

Spending on subscription digital video services, the largest of the three sectors surveyed, increased at 6.9% to hit £5bn for the first time.

Subscriptions to services such as Netflix increased by 8.3% to £4.46bn, accounting for almost 90% of the sector’s revenues.

Revenues for physical sales of DVDs and Blu-ray Discs continued to decline, falling 7.9% to £156m.

The most popular title bought or rented by consumers was Deadpool & Wolverine, with sales of 561,917. More than 80% of the purchases were through a digital channel.

The games market, which was eclipsed in value by the video sector for the first time last year, declined by 4.4% to £4.6bn. The biggest-selling game of the year once again proved to be the latest edition of EA Sports FC, formerly known as Fifa Sports, which generated 2.9m unit sales, 80% of them digital.

“After the breakneck growth of recent years it is no surprise that the games market has slowed down,” Bayley said. “But it remains a giant, nearly twice as large as the recorded music business.”