San Antonio — The Progressive Retailers Organization was at the Westin La Cantera Hill Coun
Units sales of MP3 players and portable media players (PMPs) have plateaued and are on the way down. Apple continues to dominate the market. And yet, CE suppliers continue to see opportunity in mature market that's now competing with iPhones and other AV-playing cellular handsets.
Here at CES, suppliers are trying to encourage replacement sales by launching more touchscreen-equipped PMPs and adding Wi-Fi to more models to stream music and video from the Internet. Other suppliers are trying to differentiate themselves, including iRiver, which is adding Wi-Fi phone-call capability to a PMP, and Samsung, which is launching a touchscreen model with haptic feedback to deliver a feature that Apple's iPhone and iPod Touch don't offer. Other suppliers are trying to expand the market with models designed for kids. And SanDisk hopes to expand the market by preloading an MP3 player with 1,000 songs to appeal to consumers with little time or patience for downloading individual songs to a PC or ripping CDs (see story at right).
Companies unveiling their first touchscreen-equipped PMPs include Sony, Haier, Memorex and Coby. Sony is launching its first Wi-Fi-equipped model, Sakar is showing a new Crayola-brand MP3 player, and Nextar is displaying frog-faced MP3 players for kids.
The proliferation of styles and features comes as household penetration of MP3 players and PMPs hit an all-time high of 45 percent in January 2008, exceeding the household penetration of surround sound, according to Consumer Electronics Association consumer surveys. Also attesting to the market's maturity is a mid-2008 Yankee Group forecast that U.S. consumer purchases of PMP/MP3 players would fall in 2008 for the first time. Yankee forecast a 1.9 percent drop to 42.1 million units and sees annual single-digit declines for the next four years to an annual volume of 36.3 million units in 2012.
The proliferation if music- and video-playing smartphones is also a "looming threat" to sales of MP3 players and PMPs, a Yankee Group report said. "Although fewer than 20 percent of respondents [to a mid-2008 consumer survey] indicated they would use their mobile phone as an MP3 player, multimedia handsets including the iPhone will cannibalize some of the MP3 player market," the report said.
Research company In-Stat also sees a competitive threat from cellphones, in part due to the proliferation of big-screen phones "whose usability experience is finally improving to the point where consumers are starting to demand multimedia functions on a number of handheld devices," the company said. "And it is this growing demand that now represents a viable threat to the once rapidly growing PMP/MP3 player market."
Another factor contributing to declining MP3/PMP sales is the ability to upgrade devices via a software download, Yankee said. "Although new form factors and features required users to buy new devices, major manufacturers are continuing to support their devices with software and feature upgrades, limiting the need for device replacement." Now, Yankee said, "only those in desperate need of a new form factor really need to upgrade urgently. This dynamic extends the useful life of a product and increases the time between device purchases."
Still, Yankee forecasts continued growth in the installed base of PMP/MP3 players in North America from 104.9 million in 2008 to 134.1 million in 2012, citing continuing purchases by first-time buyers. In its mid-2008 survey, Yankee found that 43.9 percent of the people who bought an MP3 player or PMP during the previous six months were first-timers. Almost 17 percent bought an MP3 player and would keep using their current one. More than 14 percent were replacing a still-functional MP3 player. And 12.5 percent were replacing a broken MP3 player.
Even as unit sales decline, PMP/MP3 players are getting a new source of content: PMP-compatible "Digital Copy" versions of movies bundled with select new Blu-ray and DVD titles. Digital Copy movies, backed by the Digital Entertainment Group and major studios, appear on a separate DVD bundled with the main BD or DVD disc.
The Digital Copy discs contain FairPlay-protected H.264 files at 1.5Mbps for iPods and iPhones. The discs also feature protected WMV files at 796kbps for Microsoft PlaysForSure-compatible PMPs. None of the files are compatible with Sony's PSP or Microsoft's Zune. For Macs and PCs, the discs contain 1.5Mbps MPEG-4 files for Macs and PCs and 1.62Mbps protected-WMV files for PCs.
Suppliers hoping to see Digital Copy files playing back on their devices are coming to CES with new products to gain market share. For a product rundown, see story on p. 104.