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NPD: MP3 Retail Growth Drops

Port Washington, N.Y. – MP3 player retail sales growth slowed in May to 22.8 percent after charting triple-digit gains of more than 200 percent earlier in the year, according to data from The NPD Group.

One analyst said the May results could indicate the beginning of slower growth for the digital audio players that are expected to lose share to music-enabled cellular phones during the next four years.

Nitin Gupta, analyst for the Yankee Group, Boston, Mass. said, “I don’t think this is temporary.” He estimates the installed base of MP3 players will reach saturation in 2007 and that music enabled cellular phones will start cutting into sales of MP3 players late in 2007. “In terms of the installed base [of MP3 players], we do see that peaking in 2007 to around 60 million users,” Gupta said.

Susan Kevorkian, program manager for audio consumer markets for IDC, San Mateo, Calif. sees the slower growth as temporary, noting that the second quarter is a slower season for MP3 players.Kevorkian also said consumers may have delayed iPod purchases because, “There’s been buzz about a new product from Apple in the first half which did not materialize.” Kevorkian added, “We expect to see a renewed push from Microsoft’s Windows Media Technologies partners around PlaysForSure compatible service and devices in the second half.”

IDC predicts MP3 player growth in the U.S. will slow in 2009 or 2010 after peaking in 2008 at unit sales to dealers of 46.1 million units, up from 31.8 million in 2005. By 2010, the market will fall to 43.7 million units, said the company.