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MP3 Tops Headphone CD In Sales, Features

Dollar sales of MP3 portables exceeded headphone-CD sales for the first time in 2004, attracting still more newcomers into the market and prompting major portable audio suppliers here to step up their MP3 focus.

Many of the new products are hard disk drive (HDD) portables, whose sales outpaced flash-memory portable sales in units for the first time in 2004, suppliers said. In 2003, HDD models outsold flash-memory portables in dollars for the first time, they said.

MP3 newcomers include X2, Sherwood and Olympus, and Toshiba is returning to the market. Last year, BenQ and Lexar entered the market, and Go Video’s Rave brand returned.

Here at CES, dealers will find:

  • existing suppliers expanding their selections, including Lexar, Rave, and Sherwood.
  • some of the first music portables with digital-picture viewers in HDD and flash-memory version.

Samsung, for instance, will show its first three HDD music portables with picture viewing; BenQ, RCA and Sherwood will show their first; and iRiver will expand its selection to two. Samsung will also show one of the first picture-viewing flash portables.

  • Some of the first flash-memory and HDD music portables that play subscription-based Windows Media Audio (WMA) downloads, which users can enjoy on their portables and PCs as long as they pay a monthly subscription fee. Dealers will see the first such models from RCA, Samsung, and Toshiba.
  • A few more models with built-in FM transmitter, including a new Lexar model.
  • A growing selection of 5GB HDD models, thought to offer more than adequate capacity in smaller sizes than 20, 30 and 40GB models. BenQ, Samsung, iRiver and RCA plan to show their first, and Olympus is entering the portable market with one.
  • A growing-but-still-small selection of flash models with 1GB of memory to appeal to active users who fear HDD crashes and to anyone seeking longer battery life. Dealers will see the first such models from X2, Samsung, Lexar and possibly Panasonic.
  • A growing focus within the flash market on 256MB models as memory prices fall.
  • More HDD portables sporting video playback, with at least one model — from Archos — adding PDA-type applications and Web browsing.

The growing availability and falling prices of HDD and flash models enabled headphone MP3 to grab top dollar share in the headphone portable market from the CD and cassette formats in 2004, CEA statistics show.

For the January-September 2004 period, factory-level dollar sales of headphone CD players fell to $355 million while MP3 portable sales grew to $412 million, said senior analyst Steve Koenig. He cited the growing share of HDD-based MP3 players, which carry higher price tags.

At the retail level, HDD units accounted for about 60 percent of MP3 portable sellthrough during the first three quarters of 2004 and 80 percent in dollars, according to Panasonic. Marketers attribute HDD’s unit-sales breakthrough almost exclusively to Apple’s iPod advertising. Overall, one marketer said, Apple enjoyed a 30 percent share of unit sales of flash and HDD during the three-quarter 2004 period.

Although portable CD players still outpaced MP3 players in units by around a 3:1 margin during that period, he noted, retailers took notice of MP3’s dollar growth and devoted more shelf and advertising space to MP3s in 2004, he continued.

Among portable CDs, he noted, the only growth segment is MP3-compatible CD players. Overall unit shipments of portable CD players fell 17 percent for the first three quarters of 2004 to 9.4 million, but shipments of MP3-compatible portable CD players grew 15 percent to 3.7 million.