Rio faces uphill struggle attempting to nibble at Apple’s iPod market dominance

“As digital entertainment goes, the undisputed star in recent years has been Apple Computer’s line of iPod handheld music players. And you wouldn’t know it from all the attention the little device is getting, but dozens of outfits making rival MP3 players are trying to undo Apple’s lead,” Amy Tsao writes for BusinessWeek. “Competitors such as privately held Rio Audio of Santa Clara, Calif., which is very close to Apple headquarters, figure iPod won’t be all things to all people. It hopes to nibble away some of Apple’s dominance. Like other small players in the business, Rio has a partnership with Microsoft to use its Windows Media Audio software.”

Tsao writes, “Nonetheless, Rio faces an uphill struggle. It’s a distant second to iPod and has a fraction of Apple’s resources. ‘Our way to execute is to design the right product at the right value and then use any kind of buzz we can take advantage of,’ says Hugh Cooney, Rio’s president. In the nine months ending this September, Apple’s iPod accounted for 54.7% of total digital-music-player units sold, vs. just 8.9% for Rio. Says Stephen Baker, analyst at market research outfit NPD Group: ‘It’s tough to maintain that [low] level of market share over the long term.’ Rio’s vice-president for marketing, Dan Torres, recently spoke with BusinessWeek Online reporter Amy Tsao about his company’s plans to catch the competition.”

Following are selected excerpts:

Q: How are you competing with Apple’s iPod?
A: When we look at the entire space, Apple makes only a hard-disk player. We have a new hard-disk offering in the Carbon 5 gigabyte. It’s a little hard for us to figure out what share we’re taking from them, but we’re competing with them directly. And we’ve seen Carbon doing quite well, but it’s still way early. We need to ride this season out and see. So far, we think we’re doing quite well, and we’ll be taking share away from iPod mini.

Q: What about Dell and Microsoft?
A: Dell is about cost. They really are a follower. They drive down costs of certain things. It’s more about [whether they will] continue to drive pricing down, but they don’t really change the landscape. Microsoft is interesting. With its Windows Media Player, it will have a significant role in changing behaviors.

Q: What will happen to the market if Apple comes out with a flash-memory-based player?
A: I think there will be a combination of things. It will be interesting to see how they change their position in coming into that market. Will they go after sports, which is one of our targets? It will be an interesting addition to the market. Apple will call attention to the importance of flash. Just a year ago they had said flash is passé.

Q: But the buzz around your products isn’t even close to iPod’s. How can you change that?
A: For not having the profile of Apple, we do well in getting people’s attention. People have been looking at our product as something that finally challenges iPod. It looks different. These devices are very small, very precious. When you get them in your hand, customers really take to them. We also have things that really matter to customers, like compact size and 20 hours of battery life, which is really important in the hard-disk market. You can plug a Rio into a Windows machine, and it mounts up automatically without any extra software.

Full article here.

MacDailyNews Take: Ohhh, a Rio mounts up automatically on a Windows machine without any extra software. Amazing. Incredible. Wow. Rio thinks an Apple iPod flash “will be an interesting addition to the market.” Yeah, you could say that – it’d be really interesting for Rio’s corporate health. Note to WMA pushers: people aren’t buying it.


  1. I was in a CompUSA yesterday and overheard the salesboy recommend the Dell Jukebox over the iPod to an older woman looking for a gift for her grandson. I think most of these computer geeks hate Apple and I bet they are getting a $5 spiff for every Dell sale.

  2. I was in Best Buy the other day and the same thing happened. A salesclerk recommended something other than an iPod to what looked like parents interested in a Christmas gift. The clerk lied to these people and said the iPod only works with a Macintosh and that there was only one online store to download music from. I normally don’t bud in to other people’s conversations but this just angered me. So I piped up and told the parents I totally disagreed and explained the benefits of the iPod (works with both Macs and PCs, iTMS most popular service, can play MP3s, and the huge catalog of songs, etc.). They thanked me, asked the clerk for an iPod and walked off. The clerk didn’t look too happy. I don’t care. Best Buy and other retailers need to educate these employees!

  3. I read the rest of the article and got a laugh out of this:

    Q: Which of these markets holds the most untapped potential?

    A: We believe the most opportunistic market is the ease-of-use users. We think our Carbon is the type of compact device, at 5 gigs, that fits that need.

  4. Rio and the others might have a strong Christmas shopping season. But what about the days after Christmas when nieces, nephews and grandchildren return the gifts to exchange for what they really wanted: an iPod!

    A word of advise to doting aunts, uncles and grandparents: Keep your receipts.

  5. swan,

    Sorry, but the mini has a hard drive. Apple won’t comment on whether or not they have a flash player in the pipeline, so we’ll all just have to see what Steve drags out of his pocket at the MWSF keynote…

  6. I had a friend show me his iRiver. You should have seen his face light up when I pulled out my iPod.

    I was also able to save my nephew from making the big mistake of getting a Dell DJ (this was before all the hype about the iPod took off). I steered him to the iPod and now he is “cool” rather than explaining to everyone why he ended up with a DJ.

    A lot of times when I buy a product I figure I can either spend just a little more for something I really like and think to myself “It was worth it” a few dozen times, or go the cheapo route and end up saying “It’s OK but what I really wanted was XXXX”. Even if I weren’t a Machead the iPod would definately be one of those times.

  7. “Best Buy and other retailers need to educate these employees!”

    They do. Every day there is probably a sales meeting where the sales people are “educated” and told to sell the crap that isn’t moving and that they have too much incentory of. They do get incentives for selling what management wants to sell at a given point.

  8. Swan:
    “the iPod mini is a Flash Based player– the regular iPod is a hard drive.. so someone is misinformed”

    lol… nothing is funnier than someone who is ignorant on a subject *insisting* that they are right and others are wrong. Sorry Swan, but the microdrive you are talking about is a small hard drive developed by IBM and then picked up by Hitachi when IBM couldn’t sell it (they priced it too high). It’s made to be compatible in CompactFlash media readers, but it is in fact a small hard drive.

    Flash media is actually a small computer chip, with no moving parts, which makes it fundamentally different than a harddrive. It has the following advantages:
    1. more stable. Not likely to lose data to a “crash.”
    2. more resistant to shock (no moving parts).

    And these disadvantages:
    1. more expensive.
    2. harder to make very large capacity.

  9. ” Flash media is actually a small computer chip, with no moving parts, which makes it fundamentally different than a harddrive. It has the following advantages:
    1. more stable. Not likely to lose data to a “crash.”
    2. more resistant to shock (no moving parts).

    And these disadvantages:
    1. more expensive.
    2. harder to make very large capacity.”

    ^^I was aware of this much^^– but thank you for enlightning me– i was under the impression that the Microdrive was a flash card. It sure marketed seems marketed that way. Anyway, my bad– will you ever forgive my insistant ignorance?

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