Original URL: http://www.theregister.co.uk/2007/09/07/walkman_comeback/

Walkman completes Sony conspiracy to hammer iTunes

Sony positions itself to squeeze Apple

By Faultline

Posted in Media, 7th September 2007 07:02 GMT

The newspapers were full of stories during 2004 about how Microsoft or RealNetworks or Napster were going to knock Apple's iTunes off its perch, and time and time again, nothing really happened. Now we have the reverse.

There are genuine storm clouds and dark forces gathering around the iTunes and iPod brands and most of the newspapers shrug it off with comments about iTunes being too enmeshed in the public consciousness. There is a real sense that each of the threats to Apple - the withdrawal of some content (see elsewhere in this issue), the new Verizon-backed Rhapsody, the Nokia Store and now the Sony Walkman realignment - have been orchestrated, or at least they have all been brought to the fore by the very existence of the iPhone. The iPhone has become a threat so all the big players are shifting furniture at once to deny it space.

But the naysayers are right to an extent, it just bothers us that so many large corporations - Microsoft, Nokia, Sony, Samsung, RealNetworks and others - all failed to take a careful look at what Apple was doing back in 2004, and came up with various moves that were not its equivalent. Now, three years on, they are queuing up to do something sensible in online music and in video.

Two weeks ago Verizon teamed with Rhapsody and MTV to create a new Rhapsody America, which is better funded, has a large existing customer base and which is now finally opening the door on the mobile device music market. With Verizon's marketing weight behind it, and co-existence of the music service on both a PC and a handset, it has finally arrived at a better place even than Apple was three years ago - if not where it is today.

The key, we said at the time, was that while everyone in the cellular industry thought that music would become the automatic demesne of the handset, few of them thought that Apple would strike first and get its music service into a handset before any handset maker settled on a solid online mobile music strategy.

Then last week it was Nokia's turn, and it did not disappoint, using mostly Microsoft media-types and we guess its PlayReady DRM, to bring the Nokia Music Store to life, a year or so after it acquired music licensee Loudeye, adding devices that mimic the capabilities of the iPhone and then some.

Today it's Sony's turn, electing to extend its Portable Media Player lines with new Walkman devices the NWZ-A810 and the NWZS610, both very similar in appearance to existing Walkman devices, but carrying that same top-of-the-line magic number of eight gigabytes of Flash memory storage - the same as the iPhone. The threats to iTunes are all companies that have access to huge amounts of Flash memory, at globally significant, rock-bottom prices: Verizon through its handset makers, especially Samsung; Nokia through its vast supply lines, and Sony because it makes some Flash memory and buddies up to Samsung and SanDisk for the rest.

And at the prices that the Sony devices are being offered, we have to say there is only one thing stopping us (and everyone else) from going out and buying one, and that's being sure that we can get whatever music we want for the thing.

As a precursor to that, Sony has closed down its old Connect service, with a promise to customers that it will offer conversion tools to convert the Atrac 3 formatted audio to the Windows Media Audio (will it take it out of the control of its DRM at the same time?). It faintly alludes to there being many new services, including one that is part of the PS3 network, that will be able to deliver in this format and that instead of competing with iTunes, Sony is opening up its device for everyone else. Right, so tomorrow, after we buy one, where do we get music from?

At present the only clear place is Napster. We had it that Napster was out on a limb and in trouble unless it could secure a place with one of the major portable device makers out there, and knowing that Sony bundles Windows Media Player 11, and a Napster trial, with the MP3 Conversion Tool it promised in its new devices, means that there is at least one subscription service that you can sign up for tomorrow. It would be a shame for Sony not to also put all that Connect-licensed music at the disposal of all of its gamer fans on the OS3 network; and likewise, in its new "open" architecture format, it would be odd if the new Walkmans and Sony Ericsson Walkman handsets didn't have access to the new Nokia Store and the MSN Music store as well, before long.

Another important step by Sony is that it has finally produced a challenge to the video iPod, which is coming up in October for its second birthday. The new Walkman devices have quality screens, two types of H.264 codec playback and could just as easily play video as music, and have the storage capacity to do so. But in order to maximize this aspect of the device, Sony needs to aggressively pursue relationships with every online video store out there, making its content available to operations such as Amazon Unbox Video, and making its players ideal viewing devices for the same, and cutting deals for cross-promotion. Will that happen?

Back in mid 2004, when it was struggling to come to terms with the iPod, Sony had several hundred previous generation portable music devices on the market, that division was losing money hand over fist, and it made wild product stabs in the dark from every division with names including the NW-HD1, which stood for the Networked Walkman Hard Disk 1, the VAIO Pocket VGF-AP, all of which sank without trace despite this current line of Walkman's having top-of-the-line devices launched as recently as this March. Virtually all of them had Atrac 3.

What we need to see with these new devices and the Sony open strategy is clarity, and a loud voice. That means we must know in every country, with TV broadcast advertising like that used in the iTunes original launches, what it costs, how it works and how cool it is to own a video Walkman. That means no rival products coming out of other Sony divisions (what is the Mylo all about?) and Sony needs to make it pretty obvious where fans can get music now that Connect has closed. This means advertising on a scale that Connect never received.

If Sony gets it right then it will be yet another of the forces driven by the jealousy surrounding the Apple iTunes and iPod franchise and it will take bites out of Apple along with the bites taken by Rhapsody America and Nokia.

So how long before all of this hurts at Apple? Consumer take off is measured by three rules - "I want one," "I can afford one" and "I know someone that has one," and it is this last qualifier that these new threats need to get past. Verizon will begin to have US penetration in about 12 months to the point where everyone has listened to a friend's Vcast handset music service and seen that it can do everything an iPhone can do; Nokia will reach many parts of the world long before the iPhone arrives there and will be considered the music phone's real inventor, and especially be a service loved by operators because they can push it out on 3G handsets, not the waning GSM devices; while Sony still has to convince us that it is a player, but if it overcomes its shyness about pushing one of its portable devices hard, and drive it aggressively through its huge retail partner channels, it will begin to build brand points also in around a year. Our take is that in a growing market iTunes will shrug this off for 12 to 18 months and then begin to see an erosion to its iPod base, which is just slightly more than the improvement in its iPhone base.

Sony has said that its Atrac-based Connect service will be phased out by March 2008, and by then the strategy for converting those customers, rather than losing them, must be clear as a bell.

Sony said that battery life on the new Walkman models allows eight hours of video playback for the NWZ-A810 series, and that it will sell for between $140 and $230 depending on storage. Battery life will be more than nine hours for the NWZ-S610 series and both devices can play audio for more than 30 hours. Prices range from $120 to $210. They both have QVGA screens and play 30 fps video at 320 x 240 resolution.

The S610 has a 1.8-inch display, the A810 slightly bigger, the S610 also has an FM tuner. Both devices support USB, and in file formats AAC, MP3 and WMA audio formats with DRM, and JPEG for photos. Sony will also adjust other members of the Walkman family to reflect its new open platform approach.

The Walkman video players store up to 1,850 songs on the eight gigabyte models, 925 songs on the four gigabyte models, and 440 songs on the two gigabyte models, for songs an average of four minutes in length at 128kbps in the MP3 format.

To our way of thinking the mistakes that have led to Apple iTunes dominance is that companies like Sony initially thought they wanted to overtake or become Apple in the music market. Later they thought they'd settle for market share survival, and now they genuinely want to take back a piece of what they now realize is not a subset market, but a market which is destined to be THE market for all music.

Copyright © 2007, Faultline

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