December 20, 2004 9:30 AM PST

Will Apple flash iPod rock market?

When IBM entered the PC market in 1981, Apple Computer took out a full-page newspaper ad welcoming its rival.

Today, with Apple reportedly poised to debut its first flash-memory-based music player after rocking the market for hard-drive devices with the iPod, some competitors are taking a similar laissez-faire stance.

"Welcome to the party," said Thomson Vice President David Arland, whose RCA brand is among the top three in U.S. retail sales.

News.context

What's new:
With Apple widely expected to unveil a flash iPod in January, rivals say they expect the Mac maker's product to give them a boost as well.

Bottom line:
Analysts say hard-drive models will hold a large share of the MP3 player market as customers seek to accomplish additional tasks with their gadgets. But with Apple's iPod success record, many expect an Apple flash player to make a huge market splash.

More stories on the iPod

Apple, of course, ended up ceding the bulk of the PC market to IBM and other PC makers. But Thomson and others say they hope an Apple flash player will ignite sales for all concerned.

"When they've come in, they've always raised the water level," said Dan Torres, Rio's vice president of product marketing. "That's good for the industry."

Torres sees a flash iPod as a fait accompli, noting that suppliers in Asia have said Apple has been making purchases consistent with the development of a flash music player.

"We've been monitoring this for a while," Torres said. "We believe that it is not a rumor; we believe it is very true."

Apple is widely expected to announce a flash iPod at Macworld in January. But for now, the company has declined to comment.

Today, the flash market overall is larger in units than the hard-drive market, but it's split among a number of players. The largest share of the U.S. retail market over the past year belongs to iRiver, followed by Rio and RCA. Other players include Nike/Phillips, Samsung and Creative Technologies.

Tapping a 'tremendous market'
Arland and others say there is room for more than just Apple.

"While Apple has enjoyed remarkable success with the iPod, even with all of that, fewer than one in 10 households has an MP3 player, so there is a tremendous market," Arland said.

Apple was also not the first to offer hard-drive-based players when it debuted the first iPod in October 2001, but it now commands the lion's share of that market. In the U.S. retail market, the iPod accounted for more than 80 percent of sales in the 12 months ended this October, according to The NPD Group. That's up from about two-thirds market share in the same period a year ago and a 40 percent share in its first year.

Financial analysts predict Apple would sell millions of flash iPods in short order. Bear Stearns analyst Andy Neff predicted earlier this month that Apple will sell 6 million units in the current fiscal year and 13.5 million the following year, but at $160, a lower average price than Apple gets for its iPods (which retail from $249 for the iPod mini to $599 for the 60GB iPod Photo).

Looking ahead to next year, Neff forecasts Apple may be able to grab 30 percent of the 34 million players that market researcher IDC estimates will sell next year.

One challenge for Apple may reflect the words of the company's own CEO, Steve Jobs, who has characterized the current market for flash-based players as made up largely of products people get as gifts and never use.

But the landscape may be shifting, thanks in large part to memory becoming available at lower prices and in higher capacities.

"We're finally seeing individual flash devices now at the 8 gigabit (1GB) density, which is starting to get pretty significant," said Michael Maia, co-founder and vice president at Portal Player. "With that, in terms of just the economics, it's going to help get the prices down."

Forcing Apple's hand
PortalPlayer, whose chip powers the iPod, has historically focused only on the hard-drive market. But as flash capacities have grown, the company now has its eye on the flash market, an area where it will compete against chipmakers such as SigmaTel, which is rumored to be powering the flash iPod.

Many of today's flash players have no screen, or only a one- or two-line display that can show the current track and basic settings. Such players haven't needed an elaborate mechanism to navigate songs, because most players only held a few albums' worth of music.

"What we see, though, is a performance segment, or a mid- to high-end segment, that's going to be different," Maia said.

NPD analyst Stephen Baker said that flash will carve out a larger slice of the market, likely forcing Apple's hand.

"They have to get into it eventually," he said. "If you look at the reasons for success of the (4GB iPod) mini and the price value curve in flash, at

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5 comments

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So ar behind
Apple is so pathetic. Cant they come up with something original anymore? They are so far behind. What will they come up with next? A media center? The only thing keeping apple around (market share down to 1.8% -<a class="jive-link-external" href="http://www.osnews.com/story.php?news_id=8713" target="_newWindow">http://www.osnews.com/story.php?news_id=8713</a>) is their ability to copy and sell to fat rich turtle wearing zealots. When will they ever get it?

Im sure apple will say they invented the flash based music player first just like everything else.

Bring on the trolls!
Posted by (35 comments )
Reply Link Flag
Ew: So ar behind
Although I don't agree with most of what you said, I do wonder when Apple is going to make an effort to improve their market share numbers. They fell from 2.1% to 1.8% in just the third quarter of last year. With the fourth quarter just about over, I wonder where that number sits now (1.5%?). Market share may not matter to them now, but I bet it will when that number is .5%
Posted by Dachi (797 comments )
Link Flag
fat rich turtle wearing zealots.
i don't think that in any way describes me. Not just the rich purchase iPods. I work for $0.25 above minimum wage, but i love my music. I don't even own a mac, i use iTunes on my pc. Don't be so hyper critical. Besides, i didn't see you mention anything about Rolls Royce or Bently or Ferrari. Someone's got to cater the people who want to spend more than they're getting back. I can't afford a mac, but just because someone can doesn't make them a "fat rich turtle wearing zealot".
Posted by mortis9 (370 comments )
Link Flag
RE So "ar" behind
Ah Robert, your nonsensical mind betrays itself once again. For
starters, Apple never claimed to have invented the hard-drive
based Mp3 player; they made the best one. They didn't invent
the download-able music store-just did it right. And now, if the
flash-based iPod stories are true, again, they won't "claim" to
have invented it, just did it better than anyone else. You see,
the real problem for you is your inability to recognize creativity
and genius. While Apple has certainly laid some real eggs, it
continues to show a consistent track record of the finest
creation in the computer and electronic industry. Unlike Dell,
which truly does just copy, Apple innovates. Unlike Microsoft,
which buys out everything it "claims", Apple does invent items .
(try Firewire). Unlike Linux, which is still so far behind the curve
(and I do like Linux by the way) Apple sets the bar higher every
time it enters the market. So Robert, just keep those sad little
databases running, while the rest of us actually try to move the
human race forward.

PS
Can you say "spell check?"
Posted by Brian Breeding (22 comments )
Link Flag
the flash bought
couldnt that flash be used in the new motorola/apple cellphone/ipod deal?
Posted by Grafix (5 comments )
Reply Link Flag
 

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