Portable Music Player Market to Double

Highlights

• 25.6 million dedicated portable music players were sold worldwide in H1 2005
• Apple is the overall leader, followed by Creative and Rio
• Mobile phone vendors should focus on low-to-medium capacity flash-based models for music
• Interfaces on music-capable phones will need to improve for wider market adoption

The new 2GB and 4GB iPod nano models, which replace the iPod mini, will pile even more pressure on Apple’s competitors. Creative reported a loss for the last quarter, despite rising unit shipments of MP3 players, indicative of an already highly competitive market with shrinking margins, particularly on the flash-based players. D&M Holdings, Rio’s owner, has recently announced that it is withdrawing from the portable music market, following an earlier announcement of the sale of its MP3 technology to SigmaTel.

Music-centric phones will clearly have some impact on the portable music player market, a fact acknowledged by Apple dipping a toe in the water through the Motorola collaboration, but Canalys sees a lot of barriers to phone handset vendors making a big splash and argues that they should focus more on the casual music consumer than try to compete for the savvy music enthusiasts at the high end, for whom a mobile phone-based player will hold only limited attraction. The higher-end devices are also likely to be met with less enthusiasm by network operators.

“A mobile phone-based player doesn’t offer much to a high-volume music consumer. The convenience of having to carry one device less will usually be outweighed by the design compromises that result. And a heavy user is not going to pay a premium to download each track over the air to a phone when there are cheaper service alternatives that offer a more sophisticated browsing experience, interface and file management,” said Canalys analyst Rachel Lashford. “The brand and image that Apple has built with the iPod would be difficult enough to challenge on its own, but would-be competitors will have to compete on accessories and usability as well, and they have to factor in the operators’ attitudes to content provision, charging and consumption.”

Source: Canalys