iPod leads growing MP3 player market

Apple's iPod continues to dominate the rapidly growing MP3 player market, which could double in the coming years. A new In-Stat report says that the worldwide market for Flash-based and Hard Disk Drive (HDD)-based players will jump from 140 million units in 2005 to 286 million by 2010 and also revealed that Apple's competitors were facing pressures in a very competitive market. The report bodes well for Apple, which experienced a slow down in iPod sales in March quarter, but recently said it was looking to Europe and Asia for iPod growth. In-Stat said that the growing market is driven by several factors, including falling price points, the availability of legitimate subscription and pay-per-download online music sites, increasing Flash memory capacities, and enhanced functionality.

The survey also found that nearly 50 percent of MP3 player owners had an iPod, representing a strong installed base. Apple's iPod has been the top selling MP3 player in the US, garnering nearly 80 percent marketshare in March and leading by a wide margin in several international markets, such as UK, Japan, Australia, and Canada.

Despite falling player prices and numerous iPod knockoffs, Apple's 'cool factor' allows it to dominate the market. In-Stat reports that sales of flash-based players were particularly strong in 2005 with some players being offered for as little as $25 in some Asians markets. Earlier this year, Apple's Shuffle price cuts and low-end 1GB Nano decreased the average selling price of the iPod and the company said that the average price would continue to decrease in the coming quarters as it experiences the full quarter effect of iPod lineup changes.

“Apple continues to dominate the market for MP3 players, particularly in the US,” says Stephanie Guza, In-Stat analyst. “Apple competitors continue to face significant challenges, such as a constrained flash memory supply, device and software integration, and the ‘cool factor’ associated with Apple’s iPod line of products.”

In-Stat also said that HDD-based players will continue to evolve into multimedia entertainment devices capable of audio, video, and imaging playback. Earlier today, one analyst said he expects Apple to double the capacity of the iPod nano line and add basic video features by the end of summer.

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