Is the heyday of the MP3 coming to a close?

Maturing digital-music market
Analysts say the changing patterns of music consumption are a sign that the digital-music market is maturing beyond its Wild West beginnings.

In the years since the rise of Napster, millions of people have swapped billions of songs online, mostly in the MP3 format; though most of that time, the most popular music players also "ripped" music from CDs into the MP3 format.

The rise of music stores such as iTunes has been contributing in part to the growth of these alternative formats -- but this trend is still muted.

The sum total of purchases from these stores remain low, compared with the overall consumption of digital music, making up about 3.5 percent of all digital music on hard drives, according to NPD. But iTunes and other services do help push hardware makers to support alternative music formats in their portable music players.

The bigger shift has come as more people have begun building their own digital-music collections by ripping their CDs into files on their computer, analysts say. Many mainstream users, who are less tech-savvy than the early adopters of digital music, use whatever format is built in as the default option in their music software, instead of selecting MP3.

For Microsoft Windows Media Player users, this has helped create Windows Media Audio (WMA) files, leading to a steady increase from 10 percent of the market in March 2003 to about 20 percent today. Apple's iTunes software was released into the Windows market in late 2003, and its default format, AAC, has gained nearly 5 percent of the hard-drive share in just seven months.

"Many consumers ripping (WMA or AAC) may actually think they're ripping into MP3," said Jupiter Research analyst Michael Gartenberg.

Analysts say that for the most part, consumers often don't care -- or even know -- what format they're using as long as it works with their hardware.

Indeed, a March 2004 Jupiter Research study on portable devices found that MP3 remained far more important in consumers' minds than any other format but that most weren't thinking about formats at all.

About 20 percent of people in the study said MP3 support was important to them when selecting a portable media device, while just 7 percent said support for Microsoft's WMA was important. Close to zero percent said AAC, the file format supported by Apple's iPod and iTunes, was essential to them.

One thing remains clear, however: Even if its usage patterns are changing, MP3 remains the one necessary format for hardware and software companies.

Some big companies that have resisted this notion for years are finally adapting to the MP3 world.

Last month, Sony confirmed that it would at last let its digital music players support the MP3 format directly, instead of making consumers convert their files into Sony's own proprietary ATRAC format.

Microsoft also recently added the ability to rip CDs into the MP3 format to its new Windows Media Player, after years of sending users to third-party plug-ins if they wanted to make MP3s.

Analysts say those moves are recognition that consumers demand MP3 support, even as they're experimenting with other options.

"As far as we can see, there are no devices without MP3 support," said Henri Linde, vice president of new business and licensing for Thomson, which oversees MP3 patents. "I've been told for 10 years that MP3 is going to die in six months. We're still waiting."