In a sign that the MP3 digital music format is heading for the home entertainment centre, consumer electronics giant Thomson Multimedia SA announced Wednesday a 20 percent equity stake in MP3 player and management software maker MusicMatch Inc. Thomson's backing suggests that the MP3 format, used today for downloading music files over the Internet, could soon become part of the common audio systems found in homes and cars. Currently, MP3 players are specialised handheld devices offered by several manufacturers. "We think that this whole industry is going to undergo a quick change that will shift the way we listen to music," said Dave Arland, spokesman for Thomson's U.S.-based subsidiary Thomson Consumer Electronics Inc. "MP3-playing car audio, stereos, and TV set-tops are all possibilities." MP3 -- whose full name is Motion Picture Experts Group, layer 3 -- is a compressed music format that shrinks near-CD-quality audio files to one-tenth the size of those on a standard CD. Weighing in at 1MB of data for each minute of music, MP3 encoded files are the first music files small enough to be downloaded over the Internet but with high enough fidelity to convince listeners to pay for it. The prospect of consumers being able to choose, pay and download, music from the Web has companies like Thomson -- the maker of RCA, Proscan, and Thomson branded appliances -- seeing lots of potential digital dollars. "Everyone, including Thomson, is working towards finding a way to let people pay for music," said Arland. "We want a consumer-friendly approach." The investment provides Thomson access to MusicMatch Jukebox technology used to play, encode and manage MP3 files. Financial terms of the deal were not disclosed. "We are confident this alliance between our companies will help maintain acceptance of MP3 as a popular standard," said Al Arras, executive vice president of Thomson Audio and Communications SBU, in a statement. So far, the major manufacturers of portable MP3 players -- Diamond Multimedia Systems Inc. and Creative Labs Inc. -- use the MusicMatch software. In the future, both Thomson and MusicMatch will work together on creating a suite of programs to let the consumer take control over how they find, purchase and listen to music online. "I see MusicMatch Jukebox as a portal to enable music e-commerce," said Dennis Mudd, CEO of MusicMatch. "We are working on variants of MP3 that will allow standard e-commerce models." While buying music online today is not a big business, the entry of mainstream companies into the MP3 music market is a key evolutionary step, said Lucas Graves, industry analyst with new media watcher Jupiter Communications Inc. "The more that digital music is easily playable on standard consumer electronic equipment, the faster it will take off," he said. "If you can have digital playback of audio files on home audio electronics systems, this will be big." MP3 has gained heavy-hitting support in the past few months. This month Microsoft announced its MS Audio 4.0 player, a competitor to MP3. Music compressed using this technology is half the size of MP3 files with little loss in quality, claims Microsoft. In addition, Thomson could end up competing with computer giant IBM. Big Blue announced this month that it would team with Real Networks on its Madison Project aimed at developing a secure method for downloading and playing music. In fact, the market is reaching critical mass, said Jupiter's Graves. "I believe that so far, every week, every month MP3 is gaining momentum," he said. Take me to the MP3 Special