The proliferation of new music-download services will lead device makers to unveil a new generation of smaller, sleeker and cheaper MP3 players this autumn, perhaps knocking Apple from its dominant position in the digital-music industry.

According to a Reuters report, Apple's consumer electronics rivals are hoping that the proliferation of companies trying to sell digital music on the Web – in a format incompatible with the iPod – will cause sales of their music devices to increase.

Rio VP of marketing Dan Torres predicts that music service providers will be a "key driver" of device sales. He said: "The market is definitely heating up."

Choices for a growing market

Many of the new iPod alternatives are not trying to compete with Apple's iPod. They hope to cater to consumers who are looking for less expensive, lower-storage-capacity flash-media players or entry-level hard-drive players that hold more than 1,000 songs – more the market of the iPod mini.

One label executive told Reuters: "Not everyone needs a 40GB player and that's where companies are seeing opportunity."

And with flash memory prices dropping, flash players are likely to become a significant portion of the digital music player business, suggests the report.

Sony Electronics product manager Kelly Davis said: "Flash is going to be here for a while, because it's more affordable. People are trying to get more capacity for their dollar."

Cheaper options are even leading some consumers to buy more than one player. According to Rio's Torres: "Cheaper flash prices are leading some consumers to purchase a flash player for the gym and active situations and a hard-drive player for power use."