Asian Companies In Race For iPod-Buster.

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Author: McClure, SteveRussell, Mark

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The picture shows a model taking a bite out of an apple. It is part of an advertising campaign to promote the latest iriver-brand digital music player, the H10, by South Korean audio company ReignCom. The tag line is "Sweeter one."

This ad illustrates the tough fight Apple Computer faces in Southeast Asia's digital portable audio market.

Japanese and South Korean electronics companies are meeting the challenge posed by the extraordinary popularity of Apple's iPod--in their home markets and elsewhere--with a new generation of portable players.

A generation ago, Japanese electronics giant Sony pioneered portable audio with the Walkman. Apple has claimed a 50% share of Japan's portableā€"digitalā€"music-player market since it launched the iPod mini there in July 2004.

Apple says it is aiming for an 80% share following the introduction in January of the iPod shuffle, which sells for about 10,000 yen ($93).

In South Korea, the primacy of flash-memory digital music players made it one of the few territories in the world where the iPod did not dominate, until this year. At its peak, in 2003, ReignCom claimed to have more than 50% of the South Korean portable-music-player market.

But like other South Korean electronics firms, ReignCom saw its market share slide when the low-priced iPod shuffle arrived.

Now these firms are slashing prices and adding features to their portable players to win back consumers.

ReignCom went so far as to run high-profile ads in local newspapers March 1--Korean Independence Day--calling for a "patriotic war" against the iPod.

"Our overall branding strategy is based on product innovation," iriver director of brand marketing Hanna Young says. The H10 is still about $30 more expensive than the iPod mini, but it has a built-in FM tuner, color screen, voice recorder and digital-photo slide-show capability.

Joining the fray is South Korean heavyweight Samsung Electronics, which has declared its ambition to be the world's top seller of portable music players by 2007. Samsung sold 1.7 million MP3 players worldwide in 2004 and is aiming for 5 million this year.

It is not just about the players: It is about the company's image. Music can drive sales and hipness. Ahn Tae-ho, CEO of the audio division of Samsung, says the portable digital players can be seen as "nurturing Samsung's brand power and enhancing consumers' views of our products."

Not to be left out, South Korea-based LG Electronics introduced its 5GB hard-drive music player in March. LGE has worked especially hard to integrate its Xfree music players with its own download service (lgxfree.co.kr).

In Japan, Sony hopes to steal some of Apple's thunder with the NW-HD5 Network Walkman, launched April 21. Featuring 40-hour battery life and a 20GB hard disk, the unit can play MP3 files as well as Sony's ATRAC-3 format. It will be priced at around 35,000 yen ($325).

Japanese company Sharp responded to the iPod challenge with the April 15 launch of two portable players geared to help it meet its target 15% share of Japan's portable-audio-player market in a year.

Sharp representative Miyuki Nakayama says the MP-A100 and MP-A200 players can download WMA files from the Web, as well as copy music digitally from CDs and make analog copies from CDs, MiniDiscs and FM radio.

Japanese electronics giant Toshiba is emphasizing visuals with the F Series of Gigabeat portable playback devices, launched between November 2004 and April 2005.

Toshiba says the players can be used to download music directly from 10 Japanese sites, including MSN Music, Excite Music Store, Oricon Music Town and Ongen Music Server.

Another major Japanese electronics firm, Matsushita, is also getting in the game, with four models of Panasonic D-Snap Audio portable players, introduced April 8 in Japan. Their price range is 18,000-28,000 yen ($167-$260). Matsushita seeks a 20% share of Japan's portable-music-player market.

Apple declined to comment on its competitors' plans. The launch of its iTunes Music Store in Japan, expected by the end of the year, could boost iPod sales.

But given the rapid growth of Japan's mobile-download market (Billboard, March 26), Asian electronics makers are looking ahead to when mobile phones will come into their own as portable music storage and playback devices.

Nakayama adds, "The market and demand for both digital audio players and mobile phones will expand simultaneously."

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By Steve McClure and Mark Russell