MP3 players could drop in price to $50 or less, with strong demand and competition expected to drive prices down, according to an IDC market forecast.

The analyst group has projected that the number of MP3 players in Australia will hit 1.3 million by the end of the year.

Although the market is currently dominated by Apple's iPod, a host of other vendors are expected to provide stiff competition.

This was particularly the case for flash memory-based players, according to IDC.

"[The] cost per megabyte of flash memory is experiencing a downward trend and there will be fierce competition... with some brands offering portable flash players below $50," said Landry Fevre, IDC research director for consumer digital markets.

Consumers could expect to see flash players dramatically increase in capacity, according to Fevre, with one- and two-gigabyte models to become common. But top-end brands would hike their prices in the short term.

"Average selling prices for portable flash players will increase by 6.8 per cent in 2005 because of the influence of the higher-end brands, such as Apple, Sony and Samsung pulling their weight and intensifying their marketing," Fevre said.

Not to be outdone though, hard-drive players would also follow suit. Fevre said the average selling price of these would fall by 12 per cent every year.

Hard-drive players, which typically store anywhere from 5GB to 40GB of music, depending on the model, currently outsold their flash-based counterparts, according to Fevre. Australia was one of the few markets in the world to follow this trend, he said. However, once the price of flash players dropped, he expected this to change by 2007-08.

IDC also predicted Sony to become number two in the market by 2006, behind Apple. Sony has signalled it will release new players and IDC expects the strength of the Sony brand to reap plenty of sales.