Heir to Walkman’s Throne

Heir to Walkman’s Throne 1

An iLounge Exclusive: Apple, Microsoft, and other contenders perceive themselves as potential heirs to Sony’s Walkman dynasty. But Sony isn’t ready to abandon its title quite yet.

March 29, 2004
By Jeremy Horwitz

If Apple’s recent success with the iPod caught your attention, you’re not alone: After almost twenty-five years without a legitimate challenge to the Walkman product line, Sony now finds itself scrambling to produce a portable entertainment product that will win over today’s more demanding consumers.

And music isn’t necessarily the answer. For years, Sony openly admitted that it wanted to own the portable games market created by Nintendo, but still managed to shock with its announcement last May that the “Walkman of the Future” – release date 2004 – would play music, movies, and games on a single device.

Now Microsoft is putting both Sony and Apple in its crosshairs. Working with five strategic partners, the software giant plans an “iPod killer” device for 2004 that will play music, movies, and digital photos – not games – with color screens and iPod-like hard drives.

Despite the marked differences in their products, each of these three major consumer electronics manufacturers believes that its concept will be this generation’s Walkman, and is willing to spend millions of dollars – perhaps billions – popularizing its devices. In anticipation of the holiday 2004 battle to come, iLounge wanted to take a look at each of the key players, their relevant past products, and the new devices they’ll market as the heir to Walkman’s throne. We hope you’ll share your comments and perspectives after reading this article.

Background: The Dynasty Sony Built

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Corporate Profile: Sony Corporation

Claims to Fame: Inventor of Walkman and PlayStation hardware, owner of major movie, music and game development companies.

Key Failures: Several controversial or unpopular Walkman follow-ups, failed proprietary video and audio standards (Betamax, ATRAC).

Market Capitalization: $38.35 billion

Liquid Assets on Hand: $7.59 billion (last filing 3-31-03)

 
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Few companies have created products so unique and well-known that their trademarked names become synonymous with specific ideas, but like Xerox, Sony manages that feat with the original Walkman. Introduced to Japanese consumers in July 1979, the first Walkman sold for 33,000 yen (approximately $152 at then-current exchange rates) and introduced the concept of portable, personal audio to the world: before the Walkman, no one used headphones or pocket-sized battery-powered cassette tape players.

Within several years, the Walkman was globally successful, and by 1995, Sony alone had sold over 150 million Walkmen across 300 different models. Numerous smaller competitors similarly sold untold hundreds of millions of Walkman clones.

But apart from the Discman, a CD-based version of the Walkman, Sony has stumbled several times with subsequent portable entertainment innovations. In 1989, the company released its first Video Walkman (the GV-8), combining an LCD screen with a portable 8-millimeter video cassette deck at a premium price. For fifteen years, Sony has continued to sell Video Walkman-branded models in obscurity, maintaining price levels of $700-1200 while competitors have released superior products. Panasonic beat Sony to the punch with portable LCD-based DVD players, and Sony fumbled after waiting three years to enter that market.

Sony has also had portable audio-related misfires in recent years, trying unsuccessfully to popularize the MiniDisc (later MD Walkman) format outside of Asia, and most recently flopping in 1999 with its Network Walkman, a premium-priced portable audio player built around proprietary Sony encryption technologies and solid state memory. The device was plagued by digital rights management problems – initially, Sony’s requirement that all audio be converted into its proprietary and unpopular ATRAC format for playback – compounded by poor interface software and hardware reliability issues. Needless to say, none of Sony’s post-Walkman or Discman-series portable entertainment devices has achieved popularity comparable to Apple’s iPod.

Sony Presses Play Again

That hasn’t stopped Sony from dreaming. Slightly less than a year ago, Sony surprised journalists at the Electronic Entertainment Expo in Los Angeles by unveiling plans for a device touted as “the Walkman of the future” – not an audio player, but rather an all-in-one portable entertainment device that goes far beyond headphones and even music.

Enter the PlayStation Portable, commonly abbreviated PSP. In the wake of Apple’s success, Sony has suggested that portable audio alone is no longer exciting enough for a global television, movie, game, music and electronics company such as itself, or for today’s consumers. From the perspective of Sony Computer Entertainment – a small but increasingly important division of parent company Sony – the ideal device to popularize would play music, movies, and interactive software, not just one medium or another.

Unlike prior Sony flops, the PSP will be loaded with premium technology. With a 4.5” widescreen LCD display, proprietary 1.8GB optical Universal Media Discs (UMD) for storage and – of course – joypads and buttons, the PSP can display movies in MPEG-4 format, use Dolby 7.1 channel surround sound output and the MP3 format for music, and play games roughly equivalent to today’s PlayStation 2 software. A rechargeable lithium-ion battery is expected to power 4-5 hours of continuous game-playing, with more or less battery life for non-gaming purposes depending on whether the screen and optical disc are continuously being accessed.

Heir to Walkman’s Throne 11Sony PlayStation Portable

Sony’s first official mock-up of the PlayStation Portable is unquestionably slick, with a black plastic and transparent Lucite case that could as easily be the iPod’s evil bigger brother. A chrome plate divides the unit in two halves, extending past the front and back shells to include a metal hole for a hand strap, and a hard plastic rear with a pop-open door for the UMD discs. Though the production model is expected to vary from Sony’s mock-up, the current unit’s resemblance to the better design features of the third-generation iPod is significant.

Confronted with the PSP’s specifications, even Nintendo has shied away from direct competition with the device, preferring instead to focus only on gaming hardware. And while smaller companies have developed PDAs with gaming and audio abilities, none touches the PSP’s robust feature set.

Therefore, if you consider video, audio, and interactive software to be the dominant media of our age, Sony is the only major consumer electronics manufacturer planning to offer a true do-it-all portable player in the immediate future. Its only weaknesses relative to the iPod: it doesn’t contain a hard disk, and though it uses Memory Sticks and discs, Sony hasn’t guaranteed yet that it will play user-recorded music. But it likely will.

Over eighty developers are already creating original game content for the PSP, and Sony has suggested that its movie and music discs will appear on the machine, as well. The PSP is planned for launch in Japan by the end of this year, with a United States launch in early 2005. Though some developers are optimistic that Sony will deliver the PSP at a price point at or under $200, insiders suggest that Sony continues to debate $249.95-$299.95 price points, comparable to low-end iPods.

Whither Microsoft?

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Corporate Profile: Microsoft Corporation

Claims to Fame: Inventor of Windows operating systems and Windows Media audio and video standards, designer of Pocket PC and Xbox hardware, possessor of $50+ billion war chest.

Key Failures: Non-PC products generally fail to achieve majority or dominant market share, current WMA music business squeezed by Apple’s iTunes

Market Capitalization: $270.18 billion

Liquid Assets on Hand: $52.78 billion (last filing 12-31-03)

 
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Some years ago, Microsoft decided strategically to stay almost entirely out of the hardware business, preferring instead to develop software that powered devices made by others. That strategy worked remarkably well, and through its partnerships with hardware manufacturers, Windows DNA spread to PCs, PDAs, cellular phones and even Sega’s Dreamcast game console – with almost no risk to Microsoft’s bottom line.

Yet when the company switched strategies to self-manufacture the Xbox, its prior wisdom was confirmed: roughly $2 billion in losses later – perhaps considerably more based on wider measurements – the console is still a very distant second to Sony’s PlayStations. Ever ambitious, Microsoft isn’t close to declaring the Xbox a lost cause, and even plans a superior follow-up. With over $50 billion in liquid financial reserves – more money on hand right now than most companies will ever make, combined – it can easily afford to take more losses if necessary.

But upon deeper examination, each of Microsoft’s other recent ventures – from its Pocket PC PDAs to Ultimate TV and its attempts to popularize Windows Media Audio as the premier format for downloadable music – has fallen short of its potential, despite significant Microsoft expenditures. In each case, the problem hasn’t been the technology, but rather Microsoft’s relative lack of compelling content by comparison with established competitors. It has often been accused, perhaps correctly, of creating hardware and solutions in search of a need, rather than products consumers have yearned for.

Microsoft’s “iPod Killer”

Now Microsoft’s ready to try something new: portable entertainment. But it’s not sinking its money into Xbox-style hardware manufacturing or games at all this time: instead, it’s sticking with a concept that brought its Pocket PC format surprisingly close to conquering the PDA market dominated by Palm. After developing a hardware and software reference design codenamed Media2Go – a successor to its Windows CE and Pocket PC formats – Microsoft has decided to let other companies assume most of the risks of manufacturing, marketing, and developing content for the devices.

Recently renamed Portable Media Centers, the Media2Go units will come in several variations, but they all have one thing in common: Microsoft reportedly believes they’ll be an “iPod Killer.” If specs were everything, we might agree: each Portable Media Center will include a hard drive with either 20GB or 40GB capacity, a 3.5” or larger color LCD screen, a simple user interface and the ability to play back re-recorded music in MP3 or WMA formats, movies and TV shows in WMV format, and digital photographs in JPEG or TIFF format. Some models will include AV outputs for connection to televisions.

Not surprisingly, these devices will interface with Windows PCs, turning home computers into docking stations for Portable Media Center satellites. If you have the right hardware and software, you’ll be able to record audio and video content on the PC for transferring over to the Portable Media Center.

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Creative Labs, iRiver, Samsung, Sanyo and Viewsonic have already signed on to manufacture Portable Media Centers, and while the list may look like a who’s who of unsuccessful iPod challengers, there’s definitely talent in the pool. Samsung and Sanyo are among the world’s top LCD makers, and happen to be supplying screens for Sony and Nintendo’s next portable consoles. Creative Labs and iRiver have enjoyed disproportionate success in the audio arena, developing impressive (if not iPod-level) followings for their flash- and hard drive-based MP3 players.

Whether consumers will view the Portable Media Centers as 21st Century Walkman replacements is still an open question, but they definitely have some weaknesses relative to the iPod: they’re physically larger, more expensive to produce, and depend largely on proprietary Microsoft content formats – WMA and WMV – which have not yet matured. Battery capacity is also a question mark. As devices to play back MP3s and JPEG-format digital photographs, they’ll be fine, but it’s unclear whether users will want to use WMV-format video files.

Current plans call for the Portable Media Centers to release in North America in the second half of 2004, most likely starting in September, at price points ranging upwards of $500 depending upon hard drive capacity and vendor. Content for the media centers can be created by consumers or purchased from companies including Disney, EMI Music, Microsoft, and Napster.

Where Does This Leave Apple?

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Corporate Profile: Apple Computer Inc.

Claims to Fame: Inventor of Macintosh computers, iPod digital audio players, QuickTime audio and video standards, and the iTunes Music Store.

Key Failures: Prior to iPod, none of company’s products directly achieved “mainstream” status, best features often stolen and exploited by lower-priced competitors.

Market Capitalization: $10.00 billion

Liquid Assets on Hand: $4.79 billion (last filing 12-27-03)

 
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With two major competitors ready to nip at its heels, Apple has only three things to be thankful for: first, it has a multi-year lead; second, Sony and Microsoft’s products are also going to compete against each other, rather than combining forces against Apple; and third, it will in any case remain the world’s most popular dedicated digital music player. But while each of these factors is legitimate, Apple will be in for a rude awakening if it begins to believe that any of them are decisively important.

A multi-year lead can be squandered. Sony blew eight years of experience developing and selling Video Walkmen when portable LCD-DVD players emerged, somehow waiting three years to compete in a newer and bigger market it could clearly have dominated. Apple’s not immune to myopia: it once had the graphical user interface operating system market all to itself. True, the iPod’s sold well to date, but it’s not yet approaching the 150 million Walkmen Sony sold in the first 16 years of that device’s lifespan. While Apple has momentum on its side, its lead at this point is hardly insurmountable, and if a competing technology has a strong chance of success, Apple risks irrelevance by falling too far behind the curve.

Sony and Microsoft’s marketing dollars won’t cancel each other out or directly attack Apple, yet they will contribute to broad consumer awareness and comparisons of new portable entertainment technologies. With tens of millions of dollars earmarked for holiday 2004 marketing of these new devices, it’s highly likely that increased adoption of portable electronics will be a consequence. But the average consumer – the mainstreamer, not early adopter – may only be able to afford one of these devices, not two or all three. Value-conscious consumers will ask which device or devices have the best features and pricing, and at the moment, Apple may not be on the better end of either measure. With a low price and lots of features, Sony in particular might have a compelling iPod alternative for younger buyers.

Finally, while there’s something to be said for the corporate strategy of narrowly defining a product so that nothing else apparently competes with it – saying, for example, that the iPod will forever remain a premium-priced music player, nothing more – that’s almost always a company’s first step towards irrelevance. Nintendo tried the same strategy with two successive game consoles, and Apple previously tried that strategy by paradoxically positioning the Macintosh as the “computer for the rest of us,” available only at elite buyers’ price points. Both companies were utterly dominated by inferior competing hardware. If Apple stubbornly focuses solely on music playback and the iTunes Music Store rather than thinking bigger, it may be destined to repeat this mistake again.

Recent rumors have suggested that Apple’s next iPod will include a color screen for displaying digital photographs, and there have been numerous hints that Apple’s considering a video-enabled iPod as a later successor. Publicly, Apple has remained coy about its plans, and despite Microsoft and Sony’s looming threats has apparently focused most of its efforts on developing bigger music and personal computer sales. It’s hard to know what Apple’s planning, but if its competitors act quickly enough, perhaps mainstream customers won’t want to wait to find out.

Admittedly, when we ask the question, “which device will emerge as the Walkman of the Future?,” we know there isn’t necessarily one answer. Some companies will certainly evolve the original Walkman concept, while others will revolutionize it for a new generation of consumers. At iLounge, we still get excited almost every time Apple announces a new product. We only hope, for the sake of our beloved iPods, that Apple has an insanely great plan for what’s about to come next.

What do you think? Add your comments using the form below! Jeremy Horwitz is Senior Editor of iLounge and practices intellectual property law in his spare time. His recent book, Law School Insider, has been called the “best book about law school -ever,” and he continues to contribute to Ziff-Davis electronic entertainment magazines.

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