Portable MP3 Player Breaks Price Barrier
A leading maker of digital music players is slashing the price of its hand-held MP3 jukebox by almost half, potentially accelerating the migration of personal music collections from bookshelves to book bags by moving within reach of a mainstream audience.
By dropping the price of its high-capacity Nomad Jukebox below $300, Creative Technology Inc. of Milpitas, Calif., has broken through an important psychological barrier, observers say, and opened a new sales outlet for its hard-drive-powered players. Creative is expected to announce the new price--$269--today, barely six months after shipping the first units.
“It’s an extremely significant development,” said analyst P.J. McNealy of the Gartner research and consulting firm. “We thought that this price wasn’t going to drop that significantly that quickly.”
MP3 players are a key element of the music industry’s digital upheaval, helping consumers slowly shift from physical goods such as CDs to digital audio files that can be stored online or stuffed by the hundreds into hand-held devices.
About 3.3 million of these players sold in 2000, and the market is expected to grow to nearly 26 million in 2005, the IDC technology research firm estimated. That compares with about 19 million portable CD players shipped in 2000, according to the Consumer Electronics Assn.’s estimates.
Sales of the Nomad Jukebox and other solid-state digital players have grown rapidly, yet their steep prices have limited the market to high-end buyers. Although the Creative models still cost far more than the average portable tape or CD player, their rapid drop suggests that hard-drive-powered units may soon reach mass-market prices.
The Jukebox, which Creative started selling in September for $500, was the first truly portable device that could hold more than 100 CDs’ worth of music. The disc-shaped, 14-ounce Jukebox stores 6 gigabytes of digital audio files, or 100 to 125 hours of near-CD-quality songs. That’s enough to house all of the CDs that the average music fan listens to on a regular basis.
Though today’s price cut is good news for consumers, it probably won’t be welcomed by the record industry. That’s because the Jukebox doesn’t impose the limits on copying and transferring music files that the major record labels have sought in their Secure Digital Music Initiative.
Ken Fong, marketing director for subsidiary Creative Labs, said buyers demanded the ability to copy the contents of their Jukeboxes for safekeeping--something that SDMI doesn’t allow. “From a business standpoint, you have to allow the end user to back up the investment they’re making,” Fong said.
Most digital music players store songs on flash memory cards, which are smaller and lighter than hard drives but much more expensive--more than $1 per megabyte of storage. While the price of those cards is being propped up by the white-hot demand for cellular phones, which also use flash memory, the price of hard drives is falling steadily and steeply.
That’s why Creative can sell the Nomad Jukebox for less than flash memory MP3 players that store only two to four hours’ worth of music.
Now that the Jukebox is priced less than $300, Fong said, major electronics retailer Circuit City has agreed to sell it. “They didn’t necessarily agree with our earlier price point,” he said, adding that the company “didn’t feel it matched the consumers we were trying to reach.”
McNealy said MP3 player prices will have to drop below $100 to have truly mass-market appeal, especially given that portable tape players can be bought for less than $50. Still, he said, Creative’s price cut is “really going to put pressure on anybody else who wants to get into this market.”
None of the big-name consumer-electronics companies has produced a high-capacity MP3 player yet, offering only lightweight players with flash memory cards. But McNealy predicted that Creative would see more competition for the Nomad Jukebox this year, and some of it probably will come from the electronics giants.
Aside from price, the main limiting factors for MP3 players are the need to own a PC and the lack of readily available content, said Bryan Ma, a senior analyst at IDC. “It’s still a lot easier just to walk down to the record store and buy the CD,” he said.
* MUSIC DEAL
Three major record companies are close to signing a deal with RealNetworks to make their music available on the Internet on a subscription basis. C2
