New York — Sales of video-centric portable media players (PMPs) will gain traction in 2006 and slowly build momentum to spike up by the end of the decade, when many early adopters of headphone MP3 players begin trading in their existing audio-centric portables for the third time, analysts and marketers told TWICE.
Sales will accelerate this year for many reasons, largely because of Apple’s expected fourth-quarter entry into the category with big-screen iPods, IDC told TWICE. Other factors include:
• The broadening base of households with broadband modems that support speedy downloads.
• An expected expansion in the number of authorized video-download sites that support transfers of movies and TV shows to portable devices.
• The debut this year of portables that support movie-studio requirements for subscription-download portability. The requirements include automatic expiration of subscription-service movies on the PC and on a portable device after a specific period of time, such as a month. The support will appear on Portable Media Centers (PMCs) incorporating Version 2 of the PMC OS and on non-PMC PMPs, according to Vongo, the Starz Entertainment download service.
• More PMPs that quickly download content from digital video recorders (DVRs) through high-speed digital connections.
• Other new features that simplify content acquisition, including Wi-Fi-connected PMPs that let consumers download authorized content without using a PC. Archos plans just such a model in the fall with touch screen.
• A greater selection of name-brand PMPs with built-in time-shifting capability to record video in real-time directly from the analog outputs of TVs and set-top boxes. Archos and RCA offer such models, and Coby plans to enter that niche.
• Growing consumer awareness, resulting largely from Apple’s aggressive video-capable iPod advertising but also from cellular carriers’ promotion of video-streaming and –download services.
• More major brand names entering the market this year, including Toshiba and Coby.
• More affordable prices, with $500+ price points on the first few generations of products falling to a suggested $399 for RCA models, a $299 street price for a planned Toshiba model, and expected sharp price points on Coby’s planned models.
Although factors supporting PMP growth are falling into place, analysts don’t expect unit sales by the end of the decade to match unit sales of music-focused portables, in large part because consumers’ opportunities to “consume” video on the go are more limited than their on-the-go music-consumption opportunities. In addition, portable device users will listen to the same song many more times than they will watch the same video, making music players more valuable to a broader base of consumers, they said.
Rising demand for video-playing MP3 portables, however, bodes well for future PMP demand, according to research company IDG. For 2006, IDC analyst Susan Kevorkian forecasts factory-level unit sales of 19.8 million video-capable MP3 portables in the United States, up 895 percent from 2005’s 1.99 million, about 99 percent of which were video-capable iPods. U.S. PMP sales in 2010 will hit 25 million, representing a five-year compound annual growth rate of 65.9 percent.
In 2005, video-playing MP3 portables accounted for only 6.3 percent of unit MP3 shipments in the United States, but by 2010, more than 57 percent of music players sold will display video on color screens up to 2.5 inches, IDC said.
In part, percentage-share growth will be supply-driven, not necessarily demand-driven, because of falling chip and display costs that enable suppliers to add value, Kevorkian said. “A color screen looks great, and video is a compelling feature to add.”
To underscore video’s potential, IDC analyst Josh Martin cited Apple’s video-download rate of about a million per week despite the $1.99 price per downloaded music video, TV episode or short film.
Demand for iTunes video downloads, plus Apple’s expected launch of its first PMP later this year, prompted IDC to raise its forecasts for 2006 worldwide factory-level PMP sales to 4.39 million from a previously forecasted 1 million. Sales in 2005 were only 415,000. In 2009, he expects worldwide sales to hit 33.8 million.
Apple’s contribution will take shape as a landscape-screen model designed with audio and video as equally important features, he said. The device will ignite category growth, he contended, because sales of other brands have been limited by consumer confusion. “Until consumers can understand what content plays on what device, they will hold back,” he said. Apple has erased that confusion by offering audio and video downloads that can easily be transferred to its portables and by aggressively promoting that compatibility, he explained.
Content companies’ newfound willingness to open up their content, mainly for broadband streaming but increasingly for download, will also spur the market’s development, said In-Stat analyst Stephanie Guza. “Last year, that willingness wasn’t there,” she said.
The lack of legal “tier one” video content, Jupiter Research VP Mike Gartenburg agreed, “has been the biggest obstacle” to PMP sales, but that situation changed late last year with the launch of video on Apple’s iTunes site. Illegal P2P video-file sharing, in contrast, “appeals to high-end geeky people,” in part because downloaded files often have to be transcoded. “For most consumers, it’s not worth the time or effort.”
Guza isn’t sure that content owners’ willingness to share will translate into a “huge uptick” in PMP sales in 2006. “It will take a couple of years for consumers to understand all of the different types of ways to get video to a portable video player,” she said.
Sales of PMPs have “been held back by a lack of focused marketing by manufacturers,” added MovieLink CEO Jim Ramo. “We need more major brand names with consumer trust and marketing muscle. It’s starting to happen. This year might be the beginning.”
Although video-capable cellphones might cut into demand for PMPs, phones’ small screens and generally low video frame rates will confine them to viewing of short-form video, such as music videos and news clips. “It’s hard to see current generation cellphones with movie viewing,” he said.
For movie viewing, portable DVD players might be all that many consumers desire to watch video outside the house, but Coby R&D manager Kenji Higa pointed out the advantages of PMPs as an alternative. The advantages include compact form, no need to lug around lots of jewel cases, and battery life. Some PMPs with hard disks operate from five to eight hours on one charge, whereas portable DVD players usually deliver about three hours on a standard battery or up to six hours on larger optional batteries.
At least for awhile, portable DVD players will enjoy the pricing advantage, but despite price, said Coby’s Higa, “The breakout year for portable media players will probably be 2007 or 2008.”
