Analysts See iPod Market Share Gains Among Teens

| Reports

Piper Jaffray analysts Gene Munster and Michael Olson on Wednesday released the results of their tenth bi-annual teen survey, which showed gains in iPod market share from the spring numbers. Specifically, 74% of the teens who possess an MP3 player said they own some type of iPod, up from 56% six months ago. The percentage of teens using iTunes is now 64%, up from 60% in the spring.

Mr. Munster and Mr. Olson visited nine high schools nationwide and collected responses from 470 students. 61% of them own an MP3 player, up from 40% in the spring, but 48% still expect to buy an MP3 player in the next 12 months. That second number is down from the 70% in the spring who said they will buy an MP3 player in the next 12 months, but 79% of the students who responded positively to that question this time said they are most interested in an iPod, up from 70% in the spring.

"While we are not surprised to see Apple leading the pack," the analysts wrote in their report, "from a market share perspective, we are surprised to see market share continue to grow, when it was already at such high levels."

Overall Attitudes Toward Digital Music

As for overall attitudes toward MP3 players, Mr. Munster and Mr. Olson found this time that 23% of the students are only interested in a digital music device if itis less than US$100, down from 28% in the spring. Fewer of them were interested in MP3 players in the $100-$199 price range, but interest in players priced at $200-$300 or $300 and higher increased.

86% of them also said that they would prefer a $199 player than holds 1,000 songs versus a $129 device that holds 250 songs. Six months ago, 65% of the students preferred the more expensive, higher capacity player.

Looking at studentsi music acquisition activities, the analysts found a slight shift away from P2P (peer-to-peer) file-sharing networks and toward online song purchases. This time around, 77% prefer P2P sources, down from 80% in the spring, while online music stores increased from 20% to 23%.

Unsurprisingly, 64% of those who buy their music online prefer iTunes, up from 60% in the spring. Napster, Rhapsody and Yahoo! were all in the single digits, with the nebulous "Other" category garnering 20% of the responses.

23% of the students said they would consider paying $0.99 per song, up from 20% in the spring, while the percentage of respondents who would consider paying $10-$15 per month for a music subscription service stayed the same at 35%.

The average age of the students Piper Jaffray spoke with was 16.7 years old. 49% of them were female, 51% male.

Piper Jaffray continues to maintain an "Outperform" rating on Appleis stock, with a $60 target price. At 12:42 PM EST on Wednesday, Apple shares were selling for $53.13, off 1.15% for the day.

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