There are signs that Apple will be extending its iTunes Music Store into markets outside the US in the early part of next year.

Sources indicate that Apple is negotiatiing with record companies, music publishers and rights bodies in Australia – negotiations that will reportedly bear fruit in the first quarter of next year.

Apple UK general manager Mark Rogers recently told Macworld that similar negotiations were taking place in the UK.

However, the climate into which Apple will launch the music-download service will be very different to that met by the US iTunes Music Store earlier this year.

The online-music industry is increasingly crowded, with computer manufacturers, software makers, media companies, and high-street shops all jumping onto the bandwagon.

The early part of 2004 looks set to see even more music-download services hit the Internet in Europe, Asia, and in Australia.

Hewlett-Packard has announced plans to introduce an Internet music store and portable music player – also in the first quarter next year.

Microsoft is to offer music downloads in Australia from early next year in partnership with European music distributor OD2 – a similar service was launched in Europe this Autumn.

And it isn't just technology companies who are announcing plans to move into the digital-music arena. Music stores HMV and Sanity have unveiled plans to launch their own site with 100,000 songs in Australia before Christmas.

Stocking fillers Competition is hotting-up in the run-up to Christmas. Services such as Napster are offering incentives to encourage festive sign-ups. Consumers who log-on to Napster in December will get a free three-day trial, and those who subscribe to the premium service after their free trial ends will receive an added gift of five free tracks.

Napster has also linked up with a number of American music resellers including RadioShack, RiteAid, Best Buy, CompUSA, Kroger, Safeway, ExxonMobil, Duane Reade, Diamond Shamrock and Speedway. Each reseller is featuring the pre-paid Napster Music Card, which offers 15 downloads for $14.85.

In the UK iPods have recently extended their presence on the High Street through Virgin Megastore and The Carphone Warehouse – just in time for the Christmas rush. But there are concerns that stock will not meet demand.

Apple Still Rosy Despite the ever-expanding market, Apple has still gained the biggest audience with the iTunes Music Store. The site has sold more than 17 million songs since it was introduced in April, and recently won the accolade of Coolest Invention of 2003 thanks to Time Magazine.

Apple says the iTunes Music Store does not make a lot of money. It claims to make most of its money in the music business by selling iPods - and has sold more than 1.4 million of them. Jobs recently said that by mid-October 31 per cent of MP3 sales in the world were iPods.

But analysts and competitors say it may be difficult for makers of portable music players, such as Apple and HP, to profit from their MP3 devices as competition in the market increases.

JP Morgan initiated coverage of Apple with a Neutral rating yesterday saying that although Apple's "innovation has no bounds, its valuation does."

Although the securities firm credited Apple as "shaping the explosive market for digital music and devices," and suggested that "Apple's innovations are once again changing the face of consumer electronics and its professional customer base is ripe for an upgrade cycle," the firm said these positive attributes already are reflected in the current stock price.