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06/12/2003

Compressed Audio Player Market Will Continue to Surge Ahead as Consumers Snap Up Diverse Array of Devices, Says IDC

FRAMINGHAM, MA – JUNE 12, 2003 – The market for compressed audio players, or "MP3 players," has been one of the bright spots in consumer electronics since their introduction in the late 1990s. According to a comprehensive new forecast from IDC, broad consumer acceptance and a diversity of form factors will combine to drive the worldwide compressed audio player market to nearly $44 billion in revenues by 2007, representing a five-year compound annual growth rate (CAGR) of 30%.


Today, consumers can choose from a variety of name-brand portable, home, and car players, as well as devices such as DVD players and videogame consoles that support compressed audio as a secondary feature. Although portable players based on flash memory and hard drives have captured the attention of both the media and digital music devotees, it is the "other" category – devices that feature compressed audio encoding and decoding as an additional feature – that will drive future unit shipments and revenues. IDC estimates that this category will capture roughly two-thirds of the overall market in 2007 and generate more than $28 billion in revenues.

"The design and image associated with products like Rio portable flash players and Apple’s iPod portable jukebox have done a great deal to spark popular interest in MP3 players," said Susan Kevorkian, senior analyst in IDC’s Consumer Devices and Technologies research group. "However, consumers buy music players because they want to listen to music, not simply because the device technology is cool or cutting-edge. Device pricing and features, consumer familiarity with device technology and PC and Internet access are key factors influencing MP3 player purchase decisions. Products like DVD players, game consoles, and PVRs that offer consumers the added bonus of compressed audio support will be important drivers of the compressed audio player market during the forecast period."

Other key findings from the report include the following:

The steadily declining cost per megabyte of flash memory will drive growth in the portable flash player market exceeding 24% CAGR worldwide during the forecast period.

The portable jukebox market will be inhibited by device price points, which are not expected to fall significantly below $200 during the forecast period due to hard drive component pricing trends.

The market for portable, home and car MP3 CD players will be bolstered by CD player manufacturers adding compressed audio support as a feature to CD players.

Although free online music services and unprotected CDs will continue to be primary sources of music for MP3 players, partnerships between device manufacturers and paid music service providers will be mutually beneficial in terms of offering accessible, comprehensive music destinations for device users, and driving new users to legitimate online music services.

The study, Worldwide and U.S. Compressed Audio Player Forecast and Analysis, 2002-2007: MP3 Everywhere, examines the worldwide and U.S. compressed audio player market, and includes unit shipments, revenue, and ASPs for 2002-2007. The market includes portable, home, and car compressed audio device form factors, segmented by storage technology, and an "other" category, which includes devices such as DVD players and videogame consoles that support compressed audio as an added feature. The report also discusses recent trends in consumer behavior using data taken from IDC’s annualConsumer Devices and Technologies Survey, which queried respondents in the U.S. about their use of digital audio technologies and preferences for digital audio hardware and software.

Contact: Susan Kevorkian, 650-962-6234, skevorkian@idc.com

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC’s customers comprise the world’s leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at www.idc.com.

IDC is a division of IDG, the world’s leading IT media, research, and exposition company.

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