Digital Music Awaits
New Wave of Rios
By RICHARD SHIM
ZD Network News
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The handheld MP3 music-player market has only one million users -- but don't expect it to stay stuck there, once a few thorny issues are resolved.
"That figure could grow as high as three million overnight if digital rights management and codec [compressor-decompressor] issues clear up," said Dataquest Inc. analyst Van Baker.
Those are the barriers facing MP3-related devices right now, but a major player in the field, S3 Inc.'s Diamond Multimedia -- seller of 500,000 Rio players, or roughly half the current market -- remains undaunted.
The company has announced plans to expand its line of Rio players, in the face of other competitors entering the online music fray.
In addition to a new version of its popular portable MP3 player, the Rio 600, Diamond will release two home components: the Rio Receiver and the Rio Jukebox, plus a Rio car player. The Rio 600 and the home and car players are due out later this year.
The strategy is to build off its existing base of a half-million Rio users.
"This is a logical transition from the player to the rest of the world," said Mike Reed, S3's director of marketing. "We realize that there's lots of room for participants, but with a first-mover advantage and a long-term strategy, we hope to give users what they want."
This early and aggressive stance and an expanding product line give Diamond a definite head start, said Dataquest's Mr. Baker. "Diamond is doing it right and leading by example."
But the online market may have a ceiling because of the uncertainty surrounding digital files.
Since there aren't standards for devices on how to encode and decode the music, and record companies are still battling over security issues, consumers are not sure which player to buy. Once standards are set, the market should grow rapidly.
"The situation is similar to DVD and Divx. Once Divx died, DVD took off," Mr. Baker said. Napster's booming popularity is further evidence that the market is waiting for the floodgates to open.
Mr. Baker predicts that once these issues surrounding digital music -- MP3, Windows Media Audio and RealPlayer files and the like -- are cleared up, it could account for as much as 80 percent of the music industry within five years.
But that's a big "if." Without resolution, digital music is more likely to stay grounded at 5% to 25% of the total market. |
