According to research group IDC's latest digital home research, "Fighting for a Piece of Apple's Pie: Australia Portable Compressed Audio (MP3) and Portable Multimedia Player (PMP) 2006-2010 Forecast and Analysis",  the portable MP3 player market experienced extraordinary growth in 2005.

IDC research found that portable MP3 player unit shipments grew by 190.8% in 2005 and reached 1.95 million units. The growth in the portable MP3 player market was mainly attributed to the portable flash segment, which grew by 392.4% in shipments in 2005. 

"Apple's withdrawal of the popular iPod Mini and the subsequent replacement of the iPod Nano signifies the market shift from jukebox to flash.  Portable flash players are based on solid state flash memory. Portable jukeboxes are based on hard drives, including 2.5in., 1.8in., and 1.0in. hard drive form factors.  We expect the flash segment to grow at the expense of the jukebox segment as flash capacities increase from 1GB in 2005 to reach 4GB in 2006, 8GB in 2007 and 16GB in 2008," said Sophie Lo, IDC analyst for Consumer Digital Markets.

According to IDC, portable MP3 player ownership has now reached critical mass, and advanced features - digital photo and video - are essential to encourage consumers to replace or upgrade their current MP3 players. IDC predicts that the portable MP3 player market will experience a compound annual growth rate of 12.5% from 2005 to 2010, reaching 3.52 million unit shipments in 2010.  The addition of video capabilities in MP3 players is expected to provide the introduction of portable video to the mainstream market, prompting some consumers to seek out and acquire video content.

IDC expects that PMPs (portable multimedia players) will face competition from alternative devices such as the PlayStation Portable (PSP), MP3 players with video support, portable DVD players, in-car entertainment systems and mobile TV.  Unsure consumers will initially flock to video-enabled mobile phones or MP3 players.  However, as more consumers are accustomed to portable video viewing, the demand for more sophisticated devices, with better suited interface for consumption of multiple forms of digital content, will drive the PMP market.