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Wednesday, October 04, 2006, 08:00 am PT (11:00 am ET)

Study reveals Apple still gaining ground in music space

After recently completing its 12th bi-annual teen survey, research and investment firm PiperJaffray said Apple Computer continues to gain share in the digital music player and online music markets, despite the constant emergence of new competitors.

The survey, which polled nearly 1,000 high school students, found that iPod market share grew to 79 percent from 77 percent over the past six months. "Of the students surveyed in the fall 2006 PJC teen survey, we found that 72 percent own an MP3 player and 79 percent specifically own an iPod," analyst Gene Munster wrote in a summary of the survey results.

According to the study, 45 percent of students expect to buy a new digital music player in the next 12 months, up from 41 percent who said they expected to buy a player in the 12 months after the firm's spring 2006 survey. Of those expecting to buy an digital music player in the next 12 months, 76 percent indicated they would buy an iPod — a figure which was slightly down from the 88 percent who said they planned to buy an iPod in the spring.

"While Apple may have lost some ground in this category, 76 percent is still significantly higher than the next highest at 8 percent (Sony)," Munster wrote.

Meanwhile, the study found that 79 percent of students are currently downloading their music online. However, most (72 percent in fall 2006, up from 65 percent in spring 2006) continue to use free (P2P) music sharing networks instead of paying for music legally.

"But of those students who use legal online music services, 91 percent said they use iTunes, which is up significantly from our spring 2006 survey, in which 71 percent of legal music downloaders said they use iTunes," Munster explained. "We believe this is a result of the increasing variety of content on iTunes."

PiperJaffray Fall 2006 Teen Survey Results


At the same time, Munster said interest amongst teens in an music-enabled phone increased to 74 percent from 70 percent in the spring survey. "Importantly, teens are becoming more willing to pay more for this type of device with 43 percent of students said they would pay more than $200, up from 37 percent," he said.

PiperJaffray Fall 2006 Teen Survey Results


The bottom line, Munster said, is that "Apple continues to dominate the [digital music] player and online music markets, despite new competitors constantly entering the market."

"We believe that winning over the teen demographic is critical to continued long-term growth and Apple is clearly in the lead in this market segment," the analyst added.

Munster maintains an "Outperform" rating on shares of Apple Computer with a price target of $99.