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Samsung, XM Ink MP3 Time-Shift Portable Deal

Samsung became the first supplier to announce plans for headphone MP3 players that time-shift satellite-radio programming when docked with the included satellite-radio tuners for the home or car.

Two Samsung MP3 portables, due in the fall, will incorporate flash memory that also stores MP3 and Windows Media Audio (WMA) music files. Both models will let users create custom playlists that mix user-selected XM songs with MP3 and WMA files. Pricing and memory capacity in megabytes were not disclosed, but one model will store 25 hours of XM programming, or about 350 songs, and the other will store 50 hours, or about 750 songs, XM said.

The Samsung models will ship with a home or car-docking station and an integrated Connect-and-Play tuner/antenna. The Samsung portables’ user interface will control the tuner to select real-time broadcasts and to time-shift like a VCR. The home docking station will connect to any home stereo, and the car-docking station will transmit programming wirelessly to a car stereo system.

Dealers selling the Samsung models will get an activation commission from XM.

The XM-enabled MP3 portables will launch at about the same time as a new XM+Napster download service, which is free to XM subscribers and was developed specifically for users of XM-enabled MP3 players from Samsung and eventually from other companies. Users listening to satellite channels when the portable is in its home or car dock will be able to mark select XM songs for future downloading by PC. When the portable is connected to a PC loaded with the XM+Napster application, the marked songs can then be automatically downloaded in WMA format — if the songs are available for authorized downloads.

Unlike XM-format songs stored on the portables, the downloaded WMA songs can be shared according to the song’s digital-rights-management (DRM) rules. Stored XM-format songs, on the other hand, are locked to the portable, though they could be recorded with poor quality through the portable’s analog headphone output.

The XM+Napster application software also makes it easier to create playlists consisting of a mix of XM-, MP3-, and WMA-format songs. The playlists can then be transferred to the portable.

The planned Samsung portables differ significantly from XM To Go headphone portables available from Delphi, Pioneer and Tao and from Sirius headphone portables announced by Xact. Those headphone portables incorporate satellite-radio tuners that receive the satellite companies’ broadcasts in real time. They also incorporate flash memory to time-shift programming for playback in no-signal locations.

XM is targeting two potential customer types. The first includes satellite-radio fans who want to listen to satellite programming wherever they are, even if they’re in a subway or other blocked-signal location, said Dan Murphy, XM’s product marketing and distribution senior VP. The other is potential MP3 users who want to avoid a PC’s complexity or don’t have the time to rip their own songs or download them from the Internet. “The market potential is therefore bigger,” Murphy said.

Because XM’s compression technology is “an open format,” Murphy noted, other companies could join Samsung in offering similar MP3 portables. Nonetheless, he said, “There’s a strong potential that Samsung will be the only ones out there this year [with an XM MP3 portable].”

For awhile, then, Samsung could be alone in offering satellite-radio margins on an MP3 product. Margins on MP3 portables range from 15 to 25 points, whereas margins on XM Plug and Play tuners and docking stations and XM To Go headphone portables offer 25 to 30 points, before activation commission.

In other news, XM and Starbucks Hear Music have produced a series of CDs to be sold at Starbucks coffee shops and online. The CDs feature both previously released and never-before-heard tracks from new and established artists. The first CD, called Hear Music XM Radio Sessions, Vol. 1, features recordings by Tracy Chapman, Jewel and Jason Mraz, as well as new WEA artists James Blunt and the John Butler Trio, and retails for $14.95. It was released last Wednesday. — Additional reporting by Amy Gilroy