The illegal downloading of music contributed to a sales decrease of 27pc at the Irish arm of Sony last year, pushing the firm into the red.
New figures show that Sony Music Entertainment Ireland recorded a loss of €229,000 after the firm recorded a profit of €503,000 in 2011 – a negative swing of €732,000.
The figures show that Sony Ireland's revenues have more than halved in the space of three years from €17.3m in 2010 to €8.6m last year.
The directors state that a decline in physical recorded sales poses a risk to the company. "Increased competition in the entertainment sector, illegal downloading, physical piracy and downward price pressure on recorded music has led to this decline."
The loss last year takes account of non-cash amortisation costs of €1.1m. The firm's accumulated profits stood at €7m last year with shareholder funds totalling €19.1m.