In the US today, multimedia hardware maker Diamond Multimedia is expected to release a portable Walkman-type device to play music files downloaded from the Internet. The so-called MP3 files -- short for MPEG1 Layer 3 -- play near-CD-quality music from a relatively tiny file. It's already the format of choice for audio pirates passing music over the Internet. And if MP3 -- which today lacks basic copy protection -- becomes a hit on the street, the music industry could lose major profits. "The predominant uses of such devices is for unauthorised playback," said Frank Creighton, senior vice president and director of investigations for the Recording Industry Association of America (RIAA). "We are clearly concerned as an industry about MP3." Diamond would not comment on details of the player, but sources close to the company confirmed the release date. Other players from smaller companies -- such as South Korea-based DigitalCast Inc. -- have already hit the market at prices around $300 (£180). Such players can hold anywhere from 30 to 60 minutes of music, which can be downloaded from a consumer's PC into the player's memory. While Diamond is neither first to bring an MP3 player to market nor a consumer electronics heavyweight, it is well-known to PC users. Its device, coupled with Diamond's well-known brand name in the PC market, could generate mainstream interest in downloading music from the Internet. Market researcher Jupiter Communications estimates the current market for digital distribution of music at a mere $1m (£0.60m) in 1998. While Jupiter predicts that will grow to $30m (£18.30m) in 2002, the market is still not large. "Internet music has been hamstrung by the lack of a portable, handheld device," said Jupiter analyst Mark Mooradian. "The new devices set to hit the market could change that." MP3 is perfectly suited to the role of a digital music messiah. While a minute of CD music can take up as much as 10MB of memory, MP3 reduces the size to less than a MB a minute, making music distribution over the Internet feasible. In addition, the shrinkage comes at little cost to quality. Listening over speakers or headphones, there is little noticeable difference between CD music and MP3 music. The format has had little legitimate backing. "MP3 is an issue of piracy," said Matt Fellers, a project engineer at Dolby Laboratories Inc. Internet audio software makers Liquid Audio Inc., a2b Music, and Real Networks are working to promote their own technologies for music. Liquid Audio's technology is based on Dolby's MPEG2 AAC compression, which Fellers claims "sounds better and is 30 percent smaller" than MP3. Still, MP3 is a free standard, and that counts for a lot. "When it comes right down to it, the technology that wins is the technology that is out there and costs the least," said Steve Grady, spokesperson for online music distributor GoodNoise Corp. GoodNoise publishes artists on the Internet in MP3 format and enables users to download the content for $0.99 (60p) a track or $8.99 (£5.50) for the whole album. Grady thinks the model will work. "Most of these people using MP3 are fans -- not pirates," he said. "If the price is right, they will pay for the music." With fan site MP3.com reporting that about 4 million free software players have been downloaded from its site, the potential market is growing quickly. That has the music industry worried. The Internet is rife with pirate sites with long lists of copyrighted music -- and that strikes a sour note with record companies. "It is hard to get a sense of how much of this is flying around the Internet," said RIAA's Creighton. "But it absolutely is going to affect our bottom line." So far, the RIAA has relied on enforcement and education. This year, the group has sued two Internet sites that maintained large databases of illegally copied -- also called "ripped" -- songs. In addition, the RIAA has aimed a campaign of education at universities, which are havens for pirate sites. "Universities have the computers and Internet technology," said Creighton. Mix that with cash-strapped students, and you have a market for free music, he said. And while the trends concern the big labels, Creighton is quick to admit that the Internet -- and digital distribution of music -- also has the music industry excited. "The potential that the Internet brings to the table -- as far as promotions, marketing and demographics tracking -- are amazing," he said. ZDNet UK News has spoken to Diamond which has confirmed that the walkman device will be released in the UK. It would not confirm when.