Analyst: Sony, Napster offerings won’t rock Apple

Steven Milunovich of Merrill Lynch said today that Apple has little to worry about in terms of competition from new flash memory-based players and subscription music services from its rivals.

In a research note provided to iLounge, Milunovich said that Sony’s three new flash MP3 players will be the most likely to challenge the iPod shuffle in the coming months. “We believe these are likely to be solid sellers, but they don’t support iTunes and do not have the cache of an iPod,” he said.

Milunovich noted that the Sony players do have a small screen, but that they use AAA batteries as compared to the iPod shuffle’s rechargeable internal battery. “We view Sony as the most serious competitor, but since Apple will be supply-constrained on shuffles it will be difficult to assess the impact in the near term,” he said.

The analyst also said that Napster’s $14.99 a month subscription service could be easily matched if Apple wanted to. “We don’t see a big impact on Apple because (1) we are not big believers in the subscription model where consumers pay indefinitely to listen to their favorite songs, and (2) if we’re wrong, Apple can establish a subscription service with few barriers to entry,” Milunovich said. “Record label executives we spoke with believe the market could be bimodal with the majority people choosing to purchase and a niche for subscription services.”

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