Today's under-10-year-old crowd makes up one-third of digital music player users. According to Advertising Age, that means there's a new market for specialized players and other products, in addition to a growing demand for kid-appropriate video and music content. "By third grade, half of the kid population in grade school has an MP3 player," said Paul Metz, senior VP at C&R Research. Their player of choice? The iPod Nano.

So far, accessory makers haven't flooded the market yet with cartoon-themed iPod cases, despite an estimate from the Consumer Electronics Association that the market will top $1 billion this year, increasing 45 percent from 2007. Forrester analyst James McQuivey believes marketers may be hesitant to push products to young children. But, he suggests they take a different approach--marketing with a positive parenting angle. "Smaller headphones with limits on audio [volume] for children could be beneficial, as well as things like packaging appropriate music for children. I would expect that we'll see more things like that by next holiday," said McQuivey. Don't forget about what goes inside those iPods--children will also be on the lookout for more kid-themed content, from videos to podcasts.