The portable MP3 player market is beginning to slow down as competition grows from alternatives, such as music phones, IDC reports. Its study, In My Place: Australia Portable Compressed Audio (MP3) Player 2007-2011, contrasts the market dynamics of portable MP3 players in Australia with music phones.

"There is no doubt portable MP3 players were adopted at record speed," IDC says. "As the portable MP3 player market reaches saturation and faces heated competition, IDC expects growth to slow considerably.

"Apple has maintained its dominance in both the device and service.  But Apple will launch the iPhone, hoping to shift mindshare from standalone MP3 players towards music phones." (Apple has so far not confirmed any plans to launch an iPhone in Australia - the Edge-based version to be marketed in the US from mid-year would not be suited to the 3G Australian market.)

IDC says music capabilities on phones have reached mainstream. "Whether or not phones substitute for standalone MP3 players is a different question," the report says. "There is no doubt that handset vendors are ready to position music phones as viable substitutes for standalone MP3 players.

"Music phones will become increasingly attractive to the mass consumer market with handsets being subsidised by the mobile operators. By 2011, music phones will reach a penetration of 84 percent amongst mobile users."