Friday, April 29, 2005

Portable Player Market a Losing Proposition?

Digital Music News: "iRiver Sees Big Sales Increases, Major Profit Downturn
The intense portable mp3 space is creating some horrific earnings results, with iRiver parent ReignCom Ltd. the latest to show a big downturn. The Korean portable mp3 manufacturer revealed a quarterly operating profit loss of 82.8 percent, with total earnings hitting 2.92 billion won ($2.91 million) on revenue volume of 122.6 billion won (US$122.2 million). But overall sales jumped 46 percent, with heavy turnover powered by some deep price discounts. Those low prices, coupled with heavy marketing costs, helped to create the earnings drop.

The ReignCom showing mirrors a result from Singaporean manufacturer Creative, which recently revealed a 72% first quarter earnings downturn. In that situation, the cocktail of super low prices and high marketing costs were also to blame, with Creative playing a dangerous strategy of catch-up. While that approach could eventually payoff, the market was recently surprised by a low-budget entry from SanDisk, with the flash memory chip manufacturer successfully entering the portable mp3 space will little marketing expenditures. Surprisingly, the company recently ranked second behind iPod in the US according to NPD Group, with SanDisk leveraging key distribution arrangements with big retailers like Best Buy."

Where is innovation? Everyone is so busy trying to build iPod clones that they all end up hawking commodity product that can only compete on price. I don't remember what marketing guru said it, but to paraphrase... "charge a premium and then justify the price". Why can't anyone learn that from Apple? iPod is dominating the market while it is the MOST expensive device in it's class. In my opinion, the main reason that no one can loosen Apple's stranglehold on the portable player market is... Accessories (or lack thereof). Maybe I'm biased because I used to work in the electronic accessory business, but people have proven (for decades) that they like to accessorize, and "personalize", their electronics (Blueberry iMac anyone?). It's time for Creative to go knock on Belkin's, Bose's and Monster Cable's door and offer up some dollars (either hard cash or marketing money) to get them on board with lines of compatible goodies.

1 comment:

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