The iPod’s rivals seek to take a bite out of Apple

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One of the oddities of the annual Consumer Electronics Show, which attracted 150,000 or more visitors to Las Vegas last week, is that Apple Computer – perhaps one of the most successful “convergence” companies thanks to the iconic iPod – has never been an exhibitor.

Apple and Steve Jobs, its mercurial chief executive, prefer to wait for the MacWorld event that kicked off in San Francisco this week.

But even if Apple eschews CES, it is difficult to forget the iPod. The show was littered with booths showing iPod and Nano accessories ranging from HiFi speakers to FM transmitters that enable music stored on an iPod to be played through a car sound system.

More than that, one of the key talking points at the CES was just how Apple’s rivals could unseat the iPod as king of the MP3 players. By some estimates iPod sales account for more than 75 per cent of the portable digital music player market.

The rest of the market is divided between about 40 would-be challengers including such companies as Creative Technologies with its “Zen” brand, iRiver America and new entrants such as SanDisk, the flash memory specialist, with its Sansa brand of players.

“None of us has more than a couple of per cent market share,” concedes Jonathan Sasse, iRiver’s chief executive, who is pinning his hopes on iRiver’s classy new flash memory-based U10 and hard drive-based H-10 music players, which support Microsoft’s Windows Media Player and, unlike Apple’s players, work with a wide range of legal music download services.

Apple’s rivals see providing a range of choice for downloads while maintaining a simple user interface as crucial if they are to chip away at the market.

“Apple has done an excellent job integrating the hardware with the iTunes software and service,” one Microsoft executive conceded privately. “We have to do better.” By better, Microsoft and its hardware partners mean they must make it simpler for customers to get new music – and other digital content – on to their players. Ultimately, however, they see Apple’s market dominance and its use of proprietary technology in its players as the company’s Achilles heel.

In the long term consumers will not want to be tied to Apple’s iPod environment, claims Scott Horn, who is in charge of marketing at Microsoft’s mobile and em-bedded devices division. “They want choices,” he insists. Microsoft, which has invested heavily in its Windows media player and portable media centre technology, believes new entrants such as Toshiba’s stylish Gigabeat devices – mini-style multimedia players built around a tiny internal hard drive – could help loosen Apple’s grip.

Others, including Sony, which has seen sales of its Walkman portable music players tumble because of the iPod, are also gearing up for a new assault on the MP3 market.

Howard Stringer, Sony’s chief executive, said during his CES keynote speech that Sony plans to re-enter the US portable music player market with a new range of devices built around its Sony Connect content download service.

Senior Sony executives made it clear that they see improving the Sony Connect service and the software that goes with it as key to their portable media player strategy – including the upcoming launch of a new electronic book reader in the US dubbed the Sony Reader, which they see as bridging the gap before the new music players are ready.

Sony executives pointed to the appointment of long-time Apple executive Tim Schaaff last month as senior vice-president of software development as underscoring Sony’s determination to compete against Apple in the portable player market.

They said Mr Schaaff has been given the task of building a unified “iTunes style” software package and service under the Sony Connect brand.

Others see the opportunity to wrestle the initiative from Apple with new devices that capture and store digital content in real time.

That is the thinking behind the next generation music phones that will enable users to download music over 3G wireless networks as well as synchronise with tracks stored on a PC. It is also behind several ultra-small satellite radio player/recorders launched at CES.

Pioneer, the Japanese electronics group, and Korea’s Samsung both launched iPod-sized personal satellite receivers designed to work with the XM satellite service in the US during the show. The Samsung Helix and Pioneer Inno will enable users to record up to five hours of programming on their hard drives in addition to listening to live broadcasts.

They also integrate with the Napster music download service allowing users to “tag” tracks and purchase them automatically when they dock the units with an Internet-connected home PC.

XM and the hardware manufacturers are clearly targeting iPod owners. A cheeky advertising campaign designed to debut the receivers declares: “It’s not a Pod, it’s the Mothership.”

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