Rockin' growth seen for MP3 players

Report sees more than 56 million digital-music players in circulation by 2010, with flash players dominating the market.

Sales of digital-music players will continue to grow rapidly, according to a new research report, with flash memory-based gadgets dominating the market in a few years.

The "U.S. Portable Music Device Forecast," published Tuesday by Jupiter Research, foresees digital-music player sales in the United States growing 35 percent this year to 18.2 million units.

Growth will remain above 10 percent for the next few years, according to Jupiter, with annual sales hitting 29.7 million units. The installed base will then reach 56.1 million units, according to the report, compared with 16.2 million now, making MP3 players a true mass-market item.

Flash memory-based players, such as Apple Computer's iPod Shuffle, will soon lead the charge, according to Jupiter. Hard-drive players, such as the regular iPod, have dominated the market until now, thanks to their greater storage capacity.

But increasing storage and shrinking prices for flash players will make them good enough for most people, according to Jupiter. The research company estimates that 90 percent of U.S. consumers have 1,000 or fewer songs in their digital-music collections, and 60 percent have less than 200. That's small enough for a flash player to do the job.

"Most music fans would love to replace their portable CD player and that envelope of eight or nine CDs they carry around," said Jupiter analyst David Card. "Once the price on flash players comes down a little, they become really attractive for that segment."

Jupiter predicts flash players will barely outsell hard-drive players in 2007 and will steadily increase their margin in the following years.

Jupiter expects Apple--which reported quarterly sales of more than 5 million iPods on Wednesday--will continue to dominate the market for the near future. Card said the timely emergence of the iPod Shuffle showed Apple isn't strictly a luxury brand.

"They've shown they're willing to be aggressive on pricing," he said. "What's amazed me is that nobody's come up with anything competitive."

Possible competition could come from cell phones. Jupiter predicts there'll be as many music-capable mobile phones in use by 2010 as dedicated MP3 players. But factors ranging from battery life to licensing headaches will make them a minimal threat to dedicated music players, Card said.

"The main thing is that the carriers want to control what goes into the phone," he said. "Nobody's interested in giving you another device to get songs off your computer."