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The research group found that average sales dropped 0.44 per cent in the third quarter despite the continuing rise in sales of MP3 players. iPod customers are preferring to fill their players from ripped CDs and p2p downloads.

Record labels will be hoping Apple's optimism is not misplaced since iTunes is still its fastest growing sales source and the one that gives them their biggest profit margins. As well as high vouchers sales, downloads may also pick up if, as some expect, new iTunes-compatible phones and possibly other devices are unveiled in the new year.

However some believe that it is Apple's inflexibility that is holding back the market, notably its refusal, so far,

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to countenance variable pricing or a subscription service. CEO Steve Jobs believes that mixed prices will only complicate the buying process and drive consumers back to p2p while arguing that there is no widespread demand for subscription services.

Unsurprisingly, Chris Gorog, CEO of the Napster downloads and subscription service, disagrees, blaming Apple's refusal to license the iPod's DRM system so that it can play downloads from music stores other than iTunes.

'The villain in the story is the iPod,' he told Business Week. 'You have this device consumers love, but they're being restricted from buying anything other than downloads from Apple. People are bored with that.'

There are some indications that Apple may be prepared to make some concessions when its licensing deals with US record labels are renegotiated next year. The labels want to be able to charge more than 99 cents for new material from top-selling artists and less for back-catalogue recordings. Currently Jobs has the strongest hand since the labels rely on it for the majority of their digital income (ringtones aside) but as Business Week notes if sales do not pick up they may look elsewhere.