Tuesday, April 10, 2007

iPod Rules, iPhone Might,

A new survey of 500 teenagers' buying patterns and brand preferences suggests that Apple's iPod market share grew to 82 percent from 79 percent last fall, and that 84 percent of students surveyed had heard of the iPhone. The study conducted by research firm Piper Jaffray also found 25 percent of participants indicating they would pay $500 for an iPhone. The survey also found that 89 percent of those students who legally purchase music online use iTunes, down slightly from 91 percent last fall.

"Apple's dominance in the portable media and online music markets is going largely unchecked," says Piper Jaffray senior analyst Gene Munster. "Also, iPhone awareness among students is high, and 25 percent show interest at the $500 price-point. We believe that the teen demographic is a critical component of long-term growth in both markets, and Apple is clearly leading the category."

"Among high school students, it is clear that Apple is successfully carrying itbrand from the media player market into the mobile phone space," the analyst said.

The percentage of students downloading music is still rising, but 64 percent of those surveyed are using free P2P music sharing networks, rather than paying for music legally. That number is down eight percent from 72 percent last fall, and iTunes share remains very high in the online music store category at 89 percent.

Some 82 percent of students polled say they own an iPod. Some four percent said they own a Sony player, while Dell, iRiver, and SanDisk players each accounted for two percent of players owned. About three percent of students said they own a Creative player.

When asked whether they planned to purchase an MP3 player within the next year, 73 percent said they would purchase some form of iPod. Just 11 percent of students surveyed said they would purchase a Sony player. The majority of students said they would pay between $200 to $300 for an MP3 player, more than the 22 percent who would pay less

than $100. 323 percent would pay between $100-$300, and just 10 percent were willing to pay higher than $300 for a portable player.

"Overall, Apple's dominance in the portable music player market remains largely unchecked, and Apple has captured the 'cool factor' among high school students," the analyst says. "We believe that Apple is poised to carry over its portable music player dominance into the mobile space with the iPhone."

"We expected to see high awareness of the iPhone among teens, given the incredible amount of buzz surrounding its launch," says Munster. Fully 84 percent of the students surveyed had heard of the iPhone, says Munster. "But we have also expected the iPhone's high price point ($499 for 4GB and $599 for 8GB) to result in less price-sensitive early adopters setting a 'gotta-have-it' trend for the iPhone," Munster says.

"Our survey indicated that 25 percent of high school students said they would buy an iPhone for $500," Munster says. "Even if 20 percent of those students (five percent) actually enter the market at $500, our estimate may prove to be conservative," Munster says.

Teens said they acquire 83 percent of their music via online download, but the percentage of music downloaded legally from online music stores -- 36 percent -- is at its highest point since the research firm began studying those numbers in the spring of 2005.

"While Apple is dominating the online music space the category as a whole remains under penetrated, as 37 percent of music purchased by teens is still purchased in a physical format," the analyst noted.

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