Consumers and Retailers Hearing the Sweet Sounds of Digital Audio Reports In-Stat/MDR.

Business Editors/High-Tech Writers

SCOTTSDALE, Ariz.--(BUSINESS WIRE)--April 14, 2004

The year 2003 was a stellar one for the digital audio market, with products and services gaining the attention of mass-market consumers and retailers, according to In-Stat/MDR (http://www.instat.com). The high-tech market research firm reports that unit shipments of portable digital audio players (solid state, hard drive and revolving media) reached more than 24 million units in 2003, representing revenues over $3 billion, with both unit shipments and revenues of portable digital audio players experiencing growth rates over 200%.

From the manufacturer side, product usage models are determining consumers' product choices, as some users demand compact, stylish products, while others are interested in products which allow them to carry their entire music collections with them at all times. To this end, manufacturers are offering diverse product lines in the flash and hard drive segments, with products offering a variety of capacities, features, sizes and price points. Marketing efforts for portable products in 2004 will stress new features, online music service and fashion affiliations, ease of use, and product styling.

"Online subscription music services have finally begun to attract significant traffic to their sites by offering portability and pricing models that are more attractive to consumers. However, while this is a step in the right direction, these services will still need to re-work their business models in order to attract consumers from peer-to-peer sites," said Cindy McCurley, an industry analyst with In-Stat/MDR.

In-Stat/MDR consumer survey data from U.S. consumers reveals that the MP3 player target market is expanding to include males and females almost equally, as well as consumers in all age groups. In addition, about 23% of U.S. households currently own some type of portable digital audio player.

In-Stat/MDR also cites the following key findings:

-- In 2004, online music revenues (physical media and downloads)

will grow about 28% over 2003.

-- Worldwide portable digital music player unit shipments

(including solid state, HDD and revolving media) will

continue to see significant growth, with a CAGR of about 16%

over the 2003-2008 period.

-- While many products seem to be getting more expensive as they

add capacity and features, the average price consumers are

willing to spend on a player is decreasing.

-- The flash segment of the market is growing more slowly than

previous years, as many consumers gravitate toward hard drive

players. The hard drive segment will see greater than 100%

growth this year, as the microdrive segment gains traction as

prices for these products decline.

-- 2003 brought changes to the market in terms of new competitors

and market shares. In terms of the solid state and hard drive

player market, Apple had a more than 7% lead over the nearest

competitor.

-- While the CD/MP3 market represents a large portion of the

portable digital audio player market, many manufacturers are

exiting this segment due to the commoditization of the

products and declining revenues.

The report, "Usage Models Drive Adoption For The Next Wave of MP3 Players & Digital Audio Services" (#IN0401167ME), analyzes and forecasts the worldwide market for compressed audio (MP3) players, online services and digital audio products for the home. Results from In-Stat/MDR's consumer survey regarding the digital audio market and a Technology Adoption Panel (TAP) survey on portable digital audio are also included. The report evaluates the global music industry with regard to sales figures, legal issues and market trends. In the portable audio segment, the report covers unit shipment market shares for 2003 for solid state and hard drive products. The report also provides five-year forecasts for unit shipments, revenues and regional segmentation. An overview of products, manufacturers, components and industry trends is also included. To purchase this report, or for more information, please visit: http://www.instat.com/catalog/Ccatalogue.asp?id=162 or contact Erin McKeighan; [e-mail] or 480-609-4551. The report is priced at $3,495.

About In-Stat/MDR

In-Stat/MDR (http://www.instat.com) offers a broad range of information resources and analytical assets to technology vendors, service providers, technology professionals and market specialists worldwide. The company stands alone in its ability to integrate both supply-side and demand-side research methodologies into a single comprehensive view of technology markets and products. This capability relies on a unique ability to cover the entire value chain from engineering-level technology, through equipment, infrastructure, services and end users.

In-Stat/MDR is part of the Reed Electronics Group, a division of Reed Elsevier (www.reedelsevier.com), a world-leading publisher and information provider. With more than 38,000 employees worldwide, Reed Elsevier operates in the science & medical, legal, education and business-to-business industry sectors, providing high value and flexible information solutions to professional end users, with increasing emphasis on the Internet.