PRS for Music blames the slump in CD sales for the downturn, alongside digital piracy. Payments saw a year on year decline of one per cent with the total amount of royalties paid out slipping to £611.2m in 2010.
The figures did show a rise in income from overseas and in commercial radio, but this was not enough to make up the shortfall.
Robert Ashcroft, chief executive of PRS, said: "The loss of high street outlets, the slowdown in physical music sales as well as the challenges capturing the full value of music usage online has meant that for the first time we have seen royalties collected dip.
"Previously, any reduction from falling physical sales had been offset by our strong performance in music licensing both in the UK and internationally. In 2010 slower growth at home and abroad failed to fully mitigate the decline."