The portable CD market has rapidly declined due to the combination of huge growth and falling costs in the MP3 sector. MP3 now has substantial coverage at all price points, with HDD driving the value sales and flash memory driving volume.
This year the market will move forward again as more and more consumers gain knowledge and an interest in the MP4 sector and what it has to offer. With portable video playback becoming more commonplace on phones and handheld consoles, and the iPod Video aiding interest, now is the time for independent retailers to sit up and take notice of the returns MP4 players could yield, as the manufacturers add variety to the sector.
Opportunities and limitations
“I think the iPod Video has certainly made people aware of what MP4 players are; that you can actually have MP4 content on a product,” notes Scott Steinberg, head of audio group purchasing for the Alba Group. “So far there have only been a few brands that have dipped their toes into it, but I think a lot more brands this year will be participating because saturation of MP3 is so vast now, with Apple having over a 50% market share.”
But there is a word of warning: don’t expect MP4 to be as huge a success as MP3. It will be a sector that appeals to many age groups and sales will continue to be good, but its applications aren’t as wide or varied.
“You can’t watch a video as you’re walking down the street, for example,” says Andrew Fellows, UK marketing manager, ARCHOS. “You can’t watch a video while you’re in the gym working out etc. You’re never going to get that kind of parity in terms of level of sales between MP3 and MP4, but certainly MP4 is becoming more and more popular.”
The total digital portable audio and video player market is now worth £684 million. Within this total, the value of video players has increased from 17.9% to 29% on a year-on-year basis and is now worth £199 million, according to GfK.
“The category started to boom in November 2005 and there has been consistent growth, although it slowed down in December 2006/January 2007 against the very strong sales during the same period last year. Also unit growth has increased in the early months of 2007,” says Simon Foy, account manager, Consumer Electronics, GfK. “The Q/E March saw sales increasing by 6%, with the single month of March up 10% on last year.”
“Value is not so positive – down 13% in the last quarter and 12% in the latest month. This is a reflection of a shift to built-in memory video players which are on average (at least over the latest quarter) £115 cheaper than the larger capacity hard disc drive products. Independent retailers have shown only a small proportion of sales for these products but with an evolving product mix, video players also attract a higher average price than pure audio players,” Foy continues. “In the latest quarter, the average price of a video player was £184, £130 higher than portable audio players which averaged only £54.”
So, what is it that consumers want from an MP4 player? In fact, many people still choose to use them as a glorified music player, but with added value features to occasionally dabble with. “The main usage is still very much music playback but with colour screens,” says James Wilson, business manager, Portable Infotainment, Philips. “Consumers want to maximse the potential of their device, so video and photo playback are becoming more popular.”
One big factor is also simplicity of use. With MP3 players it is very simple to put on your music and use it; you can just rip the CD or download a tune and click and drag it onto your MP3 player. With MP4 players and video it’s slightly more complicated, as you’ve got to make sure you use the right content format.
With this in mind, manufacturers are bringing out models that offer a facility to record programmes from TV, meaning that grabbing and watching the episode of Eastenders you missed, or the footie highlights is very simple, and therefore appealing to consumers. “What we’re doing in the Alba group with our MP4 players is offering direct record facilities from the TV, so you just plug it directly into your TV, hit record and it records automatically. Its got encoding and decoding built into it, so you don’t have to worry about actually utilising your PC, it just makes it more user friendly,” highlights Steinberg.
“It’s not just the right file format, it’s the right aspect ratio etc,” continues Fellows. “There are so many issues around it, that making things as easy as possible for consumers is an important consideration for any MP4 manufacturer.”
The ‘want’ factor
But as well as features there is also the issue of design. These products don’t have a ‘need’ factor, but a ‘want’ factor, and good looks are important considerations. “Its not like a simple clock radio – when it breaks down you go and buy the cheapest possible replacement because it fits that purpose. An MP4 player is a lot more about how it looks, how it feels. It’s very much a luxury item opposed to a necessity,” says Steinberg.
Therefore manufacturers are trying to offer an appealing selection of models that are sexy in design, easy to use and offer a multitude of features. For example, Philips’ SA6025 model also features a built-in FM tuner so consumers can use it as a radio.
For ARCHOS, their focus has been on keeping control on the larger screen section of the market, but also to provide the bridge between TV and PC with regards to content and capabilities. “Wi-Fi is something that we started to incorporate into more of our products, to allow you to stream movies around your home, but equally to allow you to, for instance, download a video to your PC via the Internet,” explains Fellows. “Then with your unit plugged into your TV set, you can stream it from your PC through your unit onto your TV.”
Other manufacturers are also trying to offer similar features. “We’re also adding Bluetooth to our products as well, so that you can actually stream music from your PC etc. and we’re supplying software with it which makes conversion of content a lot quicker and a lot easier,” says Steinberg. “All of our products are compatible with Windows Media Player 11, it makes it very easy migrating the content from one product to another.”
The Alba Group also adds value by providing pre-installed content onto its players as a bonus. “For the last three or four years with Ministry of Sound we have been pre-loading digital content onto all the MP3 players that we do in the range,” continues Steinberg. “We’re also doing that on our MP4 players; for example the MOSNP100 has a 20-minute movie of how they made Ministry of Sound, so you buy the product straight out of the box, and can enjoy content immediately. We’re also doing quite a bit on secret content, so when you purchase a product there’ll be a little leaflet in the packaging which tells you to go to a certain URL where you can download special content,” he adds.
The retail potential
With all these features on offer, the independents can gain some good returns from this market. As highlighted earlier, MP4 players sell for a much higher price than MP3 players, but consumers have just as much interest in both products’ accessories line-up. Philips, for example, offers an extensive line up of accessories, including docking stations, but there are also cases, memory storage devices, headphones etc; a plethora of products to garner extra sales from.
So how can independents make the most from this sector? ”With so much choice for the consumer it’s important to know exactly what they are looking to buy,” advises Wilson. “Then you can suggest the right product for the right consumer. As always, explaining the product benefits and also demistifying the product benefits, where necessary, will also help.”
Demonstration and display is crucial too. “In every store where the unit is connected, people can see the massive difference. As soon as you bring it to life – the quality of the image on screen, and the fact that its TV on there, not just a downloaded movie – it really brings home the value of that product,” says Fellows. “They’re very aspirational gadgets, aren’t they? (If displayed) they’ll certainly attract people’s attention,” Steinberg concludes.