Deloitte’s estimate for portable MP3 player penetration at the end of October 2008 was 47 per cent of the population, unchanged from July 2008. Since late 2007, the majority of dedicated MP3 players sold in the UK are likely to have been replacements, rather than first-time purchases (1). While about 70 percent of mobile phones sold in the UK in 2008 have an integrated MP3 player (2), the functionality is used by little over one third of users (3). Back to top

Deloitte expects portable MP3 player penetration to grow by no more than 6 percentage points during 2008, reaching a possible 49 percent by year-end. This represents a slowdown in growth compared to 2007. Growth is slowing as the market for dedicated MP3 players is reaching its natural limit, because mobile phone MP3 player use is expected to grow only modestly, and from a low base and because economic conditions are constraining spending. Back to top

Bottom line for the technology, media and telecommunications sectors

• For technology companies the UK portable MP3 player market is likely to become increasingly challenging. The economic outlook may require prices to be adjusted in line with consumers’ falling confidence level. Manufacturers of dedicated units will need to focus their attention on better segmentation, as a means of hedging eventual saturation in the under-35s demographic group and defending against the growing popularity and prevalence of mobile players. A focus on audio quality, storage capacity and cost is likely to be important, as is the development of non-music related features such as video, photo storage and other functions. Increasing the range of MP3 player accessories may also help to offset slowing growth. Unbranded, generic players may also help to open up the lower end of the market.
• • For media companies, the large base of dedicated and mobile portable MP3 players is an opportunity to expand the market for music downloads. However, this opportunity should be approached in a manner that respects the enduring appeal and central importance of CDs. Also music companies must choose their partners carefully – mobile operators and handset vendors join a long line of companies wanting to sell music to ‘captive’ customer bases – often as a loss-leader (8).
• For telecommunications companies, rising mobile MP3 player ownership may become a difficult issue. Mobile operators have already subsidised the cost of tens of millions of unused MP3 players (9), and continue to subsidise over a million more each month (10). With less than 3 per cent of the population buying MP3 downloads from the operators’ own stores (11), the cost of subsidy is likely to be much greater than music service revenues earned. Operators should focus on creating additional services that complement and supplement consumer music buying and listening behaviour. Handset vendors should avoid cutting operators, who distribute and subsidise the majority of handsets sold in the UK, out of the value chain (12). Handset manufacturers may also have to reduce the price premium for handsets with access to music, as the implicit fee is currently higher than a typical consumer’s annual spend on music (13). Back to top 

The portable MP3 player is a digital device designed to store and replay MP3 music files. There are two main variants: dedicated players and mobile phone music players. Deloitte’s MP3 player penetration figure is based on the number of both types of unit in active use, rather than the number of units sold. Back to top

The portable MP3 player has transformed the way many people in the United Kingdom listen to music, by allowing entire libraries of music and other audio recordings to be digitised and made portable. Among 14-17 year olds, 92 per cent claim to have an MP3 player (4).

MP3 player technology has its origins in the personal computer. The PC’s memory, screen, control keys, headphone socket and USB connectors are the basic ingredients of an MP3 player. However, consumer demand remained limited until miniaturisation enabled the creation of portable players. The first such devices appeared in the late 1990s, and since then over 20 million units have been sold in the United Kingdom. Today, the dedicated MP3 player is second only to the mobile phone in the UK consumer electronics market, in terms of annual sales volume (5). However, the success of the dedicated MP3 player has far outweighed the success of digital music downloads – consumers typically spend more on the player and a growing range of accessories than they do on MP3 downloads.

Although the number of mobile phone MP3 players sold is far greater than the number of dedicated MP3 players, use of the former remains low (6). However, as the storage capacity and sound quality of mobile phone players improve, and as economic outlook causes some consumers to reduce the number of devices they acquire, they may increasingly displace dedicated players (7).

The availability of mobile phones with access to, or with pre-loaded music, may change the business model for parts of the music industry and for mobile phone manufacturers. Back to top 

The portable MP3 player requires a PC to transfer music from CDs, and a broadband connection to download music from MP3 stores. Typically consumers use their portable players in conjunction with accessories, which include external speakers, car kits, docking stands, and even clothing or running shoes. Online music stores are a further catalyst for adoption of mobile music. Back to top

Any portable device capable of replaying music, including CD and Minidisk players, and radios. Back to top