Net Results/Karlin Lillington: The handheld digital content player market is beginning to go very mainstream - while also looking towards a much more elaborate future.Only two or three years ago the players - an early iPod and a few Windows devices - featured primarily as the costly playthings of twentysomething college students and dot-commers who wanted to port their PC-held music around without having to carry additional storage media such as tapes, CDs or minidisks.

This early market was itself whipped into activity by music download and sharing software like Napster and Morpheus. Before such programs, music stored on a computer tended to come from CDs people transferred, or "ripped", onto their home PCs.

Then you could make up interesting playlists, and burn your own CDs made from your mixes, if you had a CD writer.

But once you could download all sorts of new music, collections of songs that existed nowhere but your computer, it seemed a lot more desirable to skip the intermediary step of creating a CD.

Why not put the digital content directly on to a digital player, and avoid the fuss of burning, then carrying a portable CD player and all those CDs?

Now digital music players are everywhere, with the market being driven by Apple's iPod. Apple made the critical breakthrough of offering the first device able to store hours, eventually days of songs, rather than a short playlist. Apple also successfully shrank the form factor down, giving us a skinny little device that fits into a pocket but looked so cool you didn't really want to tuck it away there.

The little machine has become one of the first gotta-have-it gizmos of the new century, a real success story for Apple. The iPod gave Apple, a niche market player with its PCs, a dominant position in this new market. Now even O2 is selling them - the new pastel-coloured Mini iPod - available at a few select O2 shops.

I think that's an interesting move for O2 into what's no longer a high-end accessory market but something complementary to a mobile phone purchase.

But just shrinking down the form factor - while cute and innovative - is not going to be the future of these devices. Apple's already given some indication of what will happen next with its current models of the full-sized white iPod, which do more than just play music. Owners can store images, play games or read digital books on them too.

Rumours were circulating before last January's MacWorld conference in San Francisco - when Apple's chief executive Steve Jobs usually launches a product or two - that the big announcement this time would be an iPod video-player. It didn't happen - yet - but I expect such a move is well in the works.

If Apple doesn't do it, someone else certainly will, and that someone might well be Microsoft.

On the same day that I first heard the O2 radio advertisements for the iPod, I read of moves Microsoft is making into this sector now safely pioneered by Apple.

The company is preparing what is being referred to as an "iPod-killer" for the European market.

Not a gadget, this is software called Microsoft Portable Media Centre that will manage and play music and video and store photos. Microsoft is working with a number of hardware companies that will incorporate the software onto handheld devices.

The first of these is due out from Creative in time for Christmas, launching first in Sweden, the UK, and Denmark, and will cost around €600. The 40 gigabyte version can play about 175 hours of video, according to Microsoft, and will hold 10,000 songs.

But the Creative device will weigh about three times as much as the iPod and will be twice as long - because it has to accommodate enough screen space to view a video.

Analysts are saying this is not a market that they expect to take off quickly. The cost of the devices is high and the market hasn't been softened up for video on a tiny screen. That might be a job for 3G telephones, though if anything they seem more unlikely to hit the big time now, even with the first networks reaching completion.

But the plain old PC will play a role, too, as broadband internet access continues its spread. With broadband, viewing video becomes an easy reality rather than an exercise in patience during a long download.

So don't write off these Microsoft-enabled devices.Like Dell, the company tends to move after someone else has laid the groundwork, but it sees a trend developing.

Microsoft can afford to help push some new devices into the market, finetuning its software as it gauges what consumers want.

It's a wily move, with the endgame being a dominant position in managing people's computer-based media files, whether pictures, music or video. But don't count Apple out.

Innovation is a company byword and if, as many onlookers surmise, the company is playing for a leader's role in the emerging personal digital media market, Apple is likely to have a video iPod out before the competition.