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Aiwa Eyeing CD-R, MP3-Type Formats

Aiwa is preparing next year to venture into CD-recorders and new compressed digital formats such as MP3 while pursuing the video market more aggressively and protecting its number one share in the expanding shelf-system market, senior marketing VP Akio Imanishi told TWICE.

In a wide-ranging interview, Imanishi also said many of this year’s video introductions are being shipped later than planned or are in short supply (see story at right). But the company offset the delays by being “one of the few [shelf-system] companies that launched product on time this year.”

Normally, “a lot of new systems come out in March through May, but this year, there were not many new products [during that time].” Several competitors might have deliberately delayed shipments, Imanishi speculated, to give them time to work off excess inventories that might have resulted from overoptimistic fourth-quarter 1998 expectations.

“Overall retail inventories [of shelf systems] are probably healthy enough,” he said, “but there are still a lot of 1998 models in retailers’ warehouses.” Despite the excess, “key retailers jumped on our new models” because of Aiwa’s top market-share position, which the company expects to defend in part with a fourth-quarter ad program.

The program continues the “You Gotta Hear This” theme in three 30-second TV spots on cable networks to create 1 billion impressions, the company said. Print ads will run in car stereo enthusiast books.

Next year, Aiwa will venture into CD-recorders and digital compression formats such as MP3, but a portable that stores MP3 music in solid-state memory might not be Aiwa’s only implementation of new digital compression technologies. A format such as MP3 “is an inevitable thing for an audio company,” Imanishi said. “We are already thinking about 2000, and that format is in our blueprint.” But “we haven’t decided what will be the best application: portable or shelf system. We are looking at both.”

With a shelf system incorporating an MP3 encoder/decoder and a CD-recorder, he pointed out, consumers could create an MP3-encoded disc playable on the system or a headphone CD player with built-in MP3 decoder. “The consumer is familiar with the 12cm CD format, and you could record 10 CDs onto one disc. We could do a [Diamond Multimedia] Rio, but the silver-disc format should not be ignored.”

Aiwa CD-recorders will hit U.S. shores “as soon as possible,” Imanishi said. “I’m not sure about this year, but at the latest, it will be early next year.” Aiwa’s first priority will be to ship a shelf system with CD-recorder, then a component minisize CD-recorder.

Aiwa re-entered the headphone MD market this year to complement MD-equipped shelf systems and found that MD and CD-R purchasers “might be two separate audiences.”

In home components and shelf systems, “demand is moving to CD-R,” Imanishi said. “I originally thought that people would need a home MD recorder to copy music to play outside, but not that many people come to buy MD built into a shelf system. They buy the portable player/recorder.” And in most cases, these purchasers are younger than CD-R buyers, while older home audiophiles “are going to CD-R.”

As for MD sales, “many retailers are struggling to sell up to plan, with one exception: the portable player/recorder.” In fact, he said, Aiwa’s portable MD player/recorder has been on allocation since it became available in April because of unexpected demand. Aiwa had expected the model, which retails at $299, to outsell a play-only version by 3:1, but sales have been running at a 5:1 ratio.

Sales of the $199 MD play-only portable have not exhibited “fantastic movement,” said Imanishi, but overall, “our total portable MD sales exceed our projections.”

Retailers in general, he continued, are nonetheless “very negative about MD’s future. They are more tempted to talk about CD-R and less so about MP3.”

As for the headphone CD market, continued strong demand for that category “has dried us up,” Imanishi said. “Every month, we sell out everything.” It’s a growing category for Aiwa, which holds fifth or sixth place in market share in the category compared to a number two position in headphone cassette, number two in three-piece CD boomboxes, and two or three in one-piece CD boomboxes, he claimed.