By Lisa Johnston
New products on display at the American International Toy Fair, held in N
MP3 and portable media player (PMP) suppliers at next month's International CES will launch new products designed to encourage replacement sales in a mature marketplace, suppliers and analysts said.
Replacement sales do not yet account for a majority of unit sales but are on the rise because of average two-year ownership periods, they added.
To tap replacement demand, retailers will find a growing selection of MP3 players and PMPs with embedded FM-band HD Radio, joining the ZuneHD (see below), new touchscreen-equipped models, and more models that store video in high-definition, also joining the ZuneHD. At least one new model will store video in 1080p, compared with Zune's 720p.
In 2010, retailers might also find the first PMPs that converge with mobile DTV, either of the free mobile-ATSC variety or the subscription-based FLO TV variety.
Such developments could reverse or, at the very least, slow sales declines. After almost a decade of double- and triple-digit growth, 2010 will mark either the second or third year that units and dollars sales of MP3 players will decline in the U.S., depending on the market research firm cited.
Factory-level shipments are forecast to fall in 2009 by up to 7 percent in units and 11 percent in dollars, Consumer Electronics Association (CEA) and IDC statistics show. CEA forecast a 2010 factory-level drop of 5 percent in units and 11 percent in dollars, with Strategy Analytics forecasting a 2010 retail-level drop of 6 percent in units and 12 percent in dollars.
For the year-to-date ending August, retail sales fell 14 percent in units and 19 percent in dollars, The NPD Group contended.
Sales will slide again in 2010 because of high market penetration and, to a lesser extent, consumers opting for music- and video-playing smartphones and multimedia phones, analysts said. The MP3/PMP business has been so successful that penetration hit 46 percent of households in January 2009, according to CEA, which projects penetration will hit 60 percent in 2012.
Competition from smartphones and media-enabled cellphones has had a minor impact on MP3/PMP sales, analysts said, even though music and video-enabled phones accounted for 73 percent of phones sold in the second quarter of 2009 (excluding enterprise purchases), according to an NPD consumer survey. Smartphones accounted for 25 percent of the phones sold to consumers for the 12 months ending in August, up from 16 percent during the year-ago period, NPD also found.
Other than the touchscreen-equipped iPhone, other cellphones haven't had much impact on MP3/PMP sales because they aren't easy to operate, their supplied music-management software isn't as intuitive as iTunes software to use, and no cellphone — with the on-again off-again exception of the Palm Pre — connects to Apple's widely used iTunes software running on a PC.
In recent years, suppliers encouraged replacement and step-up sales through a variety of means, including adding higher-capacity battery-efficient flash-memory models (up to 64GB for the iPod Touch,) touchscreens, embedded Wi-Fi to access the Internet and download music, song-tagging by models equipped with HD Radio or analog-FM tuners, and the addition of downloadable applications, including games and productivity applications.
The addition of downloadable games and other apps — mainly in the iPod Touch — has helped maintain sales by broadening the appeal and utility of MP3/PMP players, they added. The move by Google's Android OS into the PMP space and the rise of the Android marketplace for apps could add to that momentum, analysts said. In 2009, for example, Archos launched its first Android-based Wi-Fi-equipped PMP, which it describes as a mobile Internet device (MID), given its 5-inch screen and hardware performance.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.