2007-2008 Sales

By Staff On Jan 7 2008 - 8:00am

TWICE: How much did the market for MP3 players, video-capable MP3 players, and portable media players (PMPs) grow in 2007, and what is the outlook for 2008?

Andy Mintz, Philips: Philips sees the MP3 market as one that will continue to grow. There is growth in audio models, but the major increase will come from MP3 players with video in 2008. There will be price erosion in audio and video in the coming year, but the consumer will receive more memory size for the same price point they received last year.

Replacement sales are encouraged by introducing great new features such as Bluetooth, Wi-Fi, touchscreen interfaces, larger screens, increased battery efficiency and built-in FM radio.

In addition, at CES we are announcing a new audio/video portable combined with the use of subscription services. Our proven user interface and use of the subscription service will increase customer ease of use, ultimately accelerating our sales growth.

Larry Smith, Archos: The PMP market is poised for exceptional growth, which comes as a result of three trends: 1) technology costs decreasing, 2) components getting smaller and becoming more advanced, 3) content of higher caliber and much easier to access. A portable media player is only as good as the content it plays and the screen on which it's displayed, which are two factors that drove much of our success in '07 and will continue to drive the category in '08.

2007 was our strongest year yet, which is a result of these trends, specifically: extremely high-quality touchscreens, easier access to great movies and music, much larger capacities and still lower costs. Being able to download a new-release movie wirelessly [via Wi-Fi] to the device was a breakthrough capability in 2007, and Archos is setting that bar for the industry.

Ross Rubin, The NPD Group: The portable media player market grew a bit over 20 percent for the 12 months ending October — good growth but a far cry from the 56 percent growth we saw in the previous 12-month period. Part of that is certainly due to the maturation of the market, but it was also due to an extended gap between Apple product updates, particularly as some portion of the market is upgraders. We will surely see a relatively stronger 2007 holiday season with new entrants from Apple in the market, as well as new entrants from Microsoft, SanDisk, Samsung and others.

Music-enabled phones have also continued to pour into the market. While they haven't sounded the death knell for the category at this point, consumers are becoming more aware of the capability as carriers have stepped up marketing and improved the process for getting music on the devices.

Certainly 2007 was the year of the iPhone for Apple, which in addition to diverting attention away from the iPod, served as the model for what is likely the future of the iPod line, if the iPod Touch is any indication. For now, though, the iPod Touch is Apple's vehicle into a broader market for that platform as it comes with no contractual strings attached.

The iPod Touch is essentially a pocketable tablet computer. Apple will likely continue to market it as an MP3 player, but all bets are off once its SDK is here. So, in terms of devices that are more dedicated to the task such as today's iPod Nano and its competitors, it will be difficult to leap past incremental improvements until wireless broadband is integrated into them. That opens the door to live consumption of Internet radio, music subscription services without syncing and wireless track purchases.

The industry needs to build more value around the music than library playback; the Sansa Connect was an interesting proof of concept, but it was tied to Yahoo! and limited by Wi-Fi.

We'll also be seeing more advanced MP3 players and portable video players for tweens from Disney and Nickelodeon.

TWICE: Did video-playing MP3 players and PMPs account for a majority of sales in 2007?

Mintz: Philips does not break out sales figures by product. In 2008, we anticipate increased sales in every category, but the largest increase will be in MP3 video players and those with larger screens.

Rubin: Unit share for video-capable portable media players grew about 5 percent in the 12 months ending October 2007, and dollar share grew even less. However, these devices accounted for a slight majority of the revenue share during that period. While we are seeing more entrants in the sub-$100 segment such as the Creative Zen and the Sansa Clip, both of which lack video, the ratio will certainly go up in 2008 now that the best-selling iPod Nano has video and Apple has released an even more video-friendly flash player with the iPod Touch. Microsoft has also brought its video capability into its flash Zune foray. However, it is not selling TV shows or movies in its Zune store.

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