MP3 Players

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MP3 Players

INDUSTRIAL CODES

NAICS: 33-4310 Audio and Video Equipment Manufacturer

SIC: 3651 Audio and Video Equipment Manufacturing

NAICS-Based Product Codes: 33-43103014

PRODUCT OVERVIEW

An MP3 player, often called a digital music player or portable audio player, is a handheld device that plays and stores audio and video files. The device is called an MP3 player because the digital format used most commonly on the device is called an MP3. This format quickly became the standard in audio file downloading and distribution in the late 1990s and into the twenty-first century. Although the MP3 format is the standard used by MP3 players, they are capable of storing and playing audio and video files that come in other digital formats, including JPEG, GIF, BMP, WAV, and Audible.

MP3 refers to audio and video compression coding standards created by the Motion Pictures Expert Group (MPEG). Formed in 1988, the group developed compression standards for all video data, including DVD movies, satellite broadcasting, and high-definition television. There are three levels of complexity in audio coding: MP1, MP2, and MP3. MP1, or MPEG-1 Part 3 Layer 1, has been abandoned. MP2, or MPEG-1 Part 3 Layer 2, is popular in digital radio and television broadcasting. MP3, or MPEG-1 Part 3 Layer 3, is the audio compression standard that became popular in the late 1990s. The MP technology allows the original audio file to be compressed to one-tenth its original size while still offering high quality sound. The compression allows a three minute song to be saved in a file approximately 4 megabytes in size; by comparison, compact disc (CD) and WAV files take up approximately 11 megabytes of space per minute.

Early History

Research into compression technologies began in 1987. The Fraunhofer Institute in Germany began research on digital audio compression with Dieter Seitzer, a professor at the University of Erlangen. In 1989 the Institute received a German patent for MP3 technology. Fraunhofer and Seitzer's coding work was then submitted to the International Standards Organization (ISO). In 1992 and 1993 the ISO integrated their work into the MPEG standards. In 1997 Tomislav Uzelac, a developer at Advanced Multimedia Products, drew on these standards to create the AMP MP3 Playback Engine, which was the first MP3 player.

Two university students, Justin Frankel and Dmitry Boldyrev, took the AMP engine and added a Windows interface. They called it Winamp. Their second version of Winamp was released on September 8, 1998, and became one of the most downloaded software programs for use on Microsoft Windows during the year.

The MP3 technology was very attractive to Internet users. Songs could be transferred into files that could be quickly uploaded and downloaded to the Internet. However, users had to hunt for Web sites or FTP sites with MP3 files or they would trade with friends if they wanted to download music. In short, the process was not organized. Peer-to-peer file-sharing (P2P) networks, which began appearing in 1999, changed this.

A Northwestern University college student named Sean Fanning created Napster, the first widely used peer-to-peer system, in January 1999. As the term peer-to-peer file sharing suggests, many users could log onto a sub-network to access the files stored on their computers. These files could then be downloaded to a user's own home computer. Napster simplified the process by making the network searchable by artist, song, and album title. The songs were free to download. The process was illegal, however, as no royalties were paid to musicians or music companies for this copyrighted material. Napster's servers did not actually hold the songs so it was the users of the site who were technically violating the music copyrights by trading songs.

The Recording Industry of America (RIAA) filed suit against Napster in 1999. Napster was charged with violating federal and state laws through "contributory and vicarious copyright infringement." The recording industry and other media representatives felt that Napster was facilitating music piracy and depriving artists and record companies of the royalties they would receive through the legal purchase of music. In the suit the RIAA asked for up to $100,000 for each song that had been illegally traded on the site.

The following year musicians Metallica and Dr. Dre both filed suit against the site. Metallica's single "I Disappear" appeared on the network before its commercial release. Some radio stations picked the song off the network and played it. Metallica soon discovered its entire catalog was on Napster. Metallica and Dr. Dre, who shared the same legal firm, requested Napster remove their material from its site. The legal firm representing the artists went even further by requesting the specific Napster users be banned from the site, users who had been identified as being directly involved with the distribution of Metallica and Dr. Dre songs. Napster removed Metallica's albums from the site; Dr. Dre's catalog was not taken off. In 2001 Madonna's single "Music" was also leaked across the Web. Lawsuits, media attention, and word of mouth drew more attention to MP3 technology and file sharing. Use of Napster and other file sharing networks increased. Although no authoritative statistics exist for tracking file sharing and Internet downloads, educated estimates of the annual number of music downloads worldwide by the early 2000s range from a few million to 60 million.

Napster users supported the idea of free music. Some viewed free music on the Internet as inevitable. Computer ownership and Internet access was expanding rapidly in the late 1990s and early 2000s. The World Wide Web seemed like a free, ungoverned source of information and ideas. Some felt that Napster users weren't profiting from the sharing of music files and that, consequently, the activity did not really infringe upon the copyrights of the musicians and artists whose music was being shared. Participants of the downloading and swapping activity argued that Napster was good for the music business because it generated consumer interest in music to which consumers might not otherwise be exposed.

In March 2001 a federal court ordered Napster to block all access to copyrighted music. Music companies won the right to block certain popular artists from appearing on the site. In September the case was settled. Napster agreed to pay musicians and copyright owners a $26 million settlement as well as an advance against future licensing royalties of $10 million. Napster also became a fee-based service in order to generate the money with which to pay the agreed upon settlements. Napster still had to settle independently with various music publishers. Related lawsuits were still making their way through the courts as of early 2007. In a similar file sharing legal battle, Sharman Networks, the company behind the file-sharing site called Kazaa, settled with music publishers in July 2006 for $100 million.

Those who downloaded digital music in the late 1990s could only listen to that music on their home computers. The portable audio players on the market in 1999 and 2000 only played cassettes and compact discs. This market was ruled by the Sony Walkman. Sony launched the Walkman device in 1979. By 1984, the company had sold over 13 million players; it shipped 213 million Walkman units worldwide in 2005. In the late 1990s no company had manufactured an MP3 player that captured consumer interest the way the Walkman had.

MP3 players did exist during this period, however, they were awkward devices that might only hold a few minutes of music. Some of the early efforts included products from Eiger Labs, Sensory Science, Compaq, iRiver, and Creative Labs. The world's first mass-produced hardware MP3 player was Saehan's MPMan, sold in Asia starting in the late spring of 1998. It was released by Eiger Labs in the United States in 1998. The Rio PMP300 was released by Diamond Labs a few months later. It is sometimes falsely referred to as the first mass-produced player, probably because it was the first player to spark consumer interest and media attention. It also drew the attention of the Recording Industry Association of America. The RIAA filed suit against the company, claiming the device aided in illegal music copying. Production of MP3 players was temporarily blocked. However, the courts eventually ruled in favor of Diamond Labs. Digital music players were ruled legal devices.

The Apple iPod

Apple Computer, already present in the computer and software industries, became increas-ingly interested in portable digital electronics and was interested in developing video products that were also portable. Apple Computer had done some preliminary testing of music players and decided to pursue its efforts in the field because it perceived the competition as weak. Apple's CEO put the company's engineering chief, Jon Rubenstein, in charge of creating a music player. He was given eight months.

The name iPod was proposed by Vinnie Chieco, a freelance copywriter. Chieco was part of a group of people assembled by Apple to come up with a strategy for introducing the new music player to the public. After Chieco saw a prototype, he was said to have thought of the movie 2001: A Space Odyssey and the phrase "Open the pod bay door, Hal!", which refers to the white EVA Pods of the Discovery One spaceship. Apple had previously registered the name iPod when it planned to expand into Internet kiosks.

Apple's new player held a small monitor, a scroll wheel to guide the user through various functions displayed on the monitor, and a 5 gigabyte hard drive. It could hold approximately 1,000 songs. With later iPod models the wheel would become stationary and touch-sensitive; the user moves through the iPod folders by clicking various places on the wheel. Some models are flash-based and hard-disk based. Flash-memory was used in early, less expensive models; this distinction becomes less important in later, more sophisticated iPod models. The iPod operates under Advanced Audio Coding (AAC), which is part of the MPEG-2 and MPEG-4 compression technologies. The AAC offers superior sound to standard MP3 files. The iPod also plays MP3 files and is compatible with JPEG, GIF, BMP, WAV, Audible, MPEG-4, and H.264 video.

Apple Computer's Chief Executive Officer, Steve Jobs, revealed the first iPod to the public in October 2001, shortly after the terrorist attacks in September of that year. The iPod came to the market at what some considered an inopportune time. One source noted the state of the economy during the fall of 2001—consumer confidence was low, the computer market had stalled, microchip giant Intel was leaving the consumer electronics market, and the Christmas shopping season was predicted to be a gloomy one for retailers. The device also had a $399 price tag, double the cost of many competing digital players. A larger capacity device was also available for $499. Consumers didn't seem to mind the high cost though as Apple reports selling 376,000 iPods in 2002. A year later, they sold 937,000. In 2004 the company sold over 4.4 million. Retail tracking firm NPD Group reported Apple's market share of hard-drive digital players climbed from a 33 percent share in August 2002 to 64 percent in August 2003 and to 82 percent in August 2004.

Why did Apple's iPod succeed when other music players had not? CEO Steve Jobs offered his own explanation. In part it was the hardware and software expertise Apple brought to the job of designing the device. A significant part of Apple's success was attributed to having made the device user-friendly. Jobs described the iPod's smooth surface as "holistic and simple." Starting with this smooth design the developers then worked inward; the goal being to design the interior of the system as simply as possible. Jobs was said to have known that Apple was on the right track when everyone on the design team wanted an iPod.

Apple continually released new generations and models of iPods from 2003 to 2005. Color screens were added in the middle of 2005 and video was added in October 2005. The fifth generation iPod was released on September 6, 2005. Its 60 gigabyte hard drive could hold more than 10,000 songs. The iPod mini and iPod nano, both released in 2005, sold well because of their compact size and the array of colors in which they were available.

Apple also created iTunes, an online store where users can purchase and download individual songs or entire albums. It took Apple approximately eighteen months to convince the music labels to sign on to the store. Unlike Napster, these downloads are legal. Users pay for the music they download—typically $0.99 per song. The site, which was introduced on April 29, 2003, allows users to hear a 30 second sample of a song before deciding to purchase it. Users might also rate songs, or even create lists of favorites songs called playlists. Other users can view these lists and purchase the songs on them as they wish. iTunes uses jukebox technology, which enables users to create and manage a digital library. Users can burn CDs on their home computer using songs from this library. Users can also upload music from other sources (a current CD collection, for example) to this library. This upload process is called ripping.

MARKET

MP3 Players

According to the Consumer Electronics Association, there were 500,000 MP3 players shipped in the United States in 2000. By 2002 the number of shipments increased 240 percent to 1.7 million. Unit shipments doubled annually between 2002 and 2004. Then between 2004 and 2005, shipments increased approximately 250 percent, from 7.1 million to 24.8 million. The growth from 2005 to 2006 was not as impressive, a mere 33 percent. Shipments were expected to peak in 2008 at 39 million units. Worldwide shipments of portable media players increased from 17 million in 2003 to 181.4 million in 2006.

In early 2000 Sonicblue, Creative Technologies, and D-Link were the top companies in the MP3 player market, according to Cahner's In-Stat. Apple's iPod was released in October 2001 and quickly dominated the market. It has been the leader in the digital music player industry in the United States since October 2004. Apple has sold 70 million iPods worldwide as of 2006.

Apple had a 75 percent share of the MP3 player market in the United States in 2006, according to retail tracking firm NPD Group. SanDisk was its closest competitor with a 10 percent market share. Creative Labs and Sony each had a 2 percent market share in 2006. Apple had a 26 percent share of the global MP3 player market in 2005, followed by Creative Labs with a 7 percent share and iRiver with a 3 percent share, according to estimates from Credit Suisse and International Data Corp. The iPod is the best-selling player in Canada, Australia, the United Kingdom, France, Spain, Italy, and Japan, according to the latest data published from market researchers NPD Group, GFK, and BCN.

Shortly after Apple took control of this market, speculation began as to what company would produce a product that would heavily compete with the iPod. Some thought software giant Microsoft might be able to do it. Microsoft launched its Zune digital player just before Christmas 2006. Most reviewers were unimpressed. The critic at the Wall Street Journal described it as "rushed and incomplete." A reviewer in the Chicago Sun Times called it "absurd and so obviously immune to success it evokes a sense of pity." Consumers, too, seemed unimpressed. NPD reports that Zune dropped from second to fifth within two weeks in the digital media player market, taking 2.1 percent of the market.

Downloads

Apple's iTunes store took 67 percent of the music downloading market for the first five months of 2006, according to NPD Group. A distant second was eMusic with an 11 percent market share. Real Rhapsody and (the now legal) Napster had 4 percent market shares each. On January 9, 2007, Steve Jobs announced that two billion songs had been downloaded from its iTunes music store. The company reported that an average of 4 million songs were downloaded each day in late 2006. Digital music sales represented 10 percent of the overall music market that year. Music tracking analyst Soundscan reports that digital music sales grew 65 percent in 2006 and generated $1 billion in revenues. Meanwhile sales of compact discs fell in 2006 for the fifth time in six years. Apple was the seventh largest retailer of music in the United States in 2005, up from its number 14 position in 2004. In 2005 the company topped music chains Tower Records and Sam Goody in terms of music retailer rankings. Wal-Mart was number one on the list.

The iTunes music store was overwhelmed by traffic on its Web site the day after Christmas when music shoppers, their brand new iPods in their hands, went shopping for music. The iPod was the most wished for Christmas present in both 2005 and 2006, according to a Consumer Electronics Association poll conducted around the holidays.

KEY PRODUCERS/MANUFACTURERS

Apple Inc.

Apple is the leading maker of MP3 players. Based in Cupertino, California, the firm employs 17,787 people and has 165 retail stores in the United States, Canada, Japan, and the United Kingdom. For the fiscal year ended September 2006, it generated sales of $19.3 billion. The company was formed on April 1, 1976 (April Fools Day) by Steve Wozniak, Steve Jobs, and Ronald Wayne; Wayne would sell his share of the company back to Jobs and Wozniak before the company was incorporated in 1977. Despite humble beginnings, Wozniak and Jobs are credited with helping to start the home computer industry. They introduced the Apple II in 1977, which became a popular model in classrooms and in the home personal computer market. The company continued to release a number of successful models such as the Mac II, the PowerMac, and the NeXT Computer.

In August 1998 Apple released the iMac. The computer, with its Mac operating system, was seen as an attractive alternative to Windows-based computers (Microsoft Windows had 90 percent of the market). The iMac sold 800,000 units in its first year. Apple has a small presence in the overall computer market. Apple was the fifth largest computer vendor for the fourth quarter of 2006 with a 5.1 percent share; Dell was first with a 29.1 percent share. Apple's share of the MP3 player market in the United States was very strong with approximately 72 percent of the market share in February 2007. Apple's online music store, iTunes, had approximately 80 percent of digital music sales. Just over half of Apple's revenue (57%) comes from the iPod and music-related sales. Worldwide sales of the iPod increased from 900,000 units in 2003 (a 5.3% share of the portable media player market) to 41.4 million (21.4% share) in 2006.

SanDisk Corporation

This company is the second largest manufacturer of MP3 players. In February 2007 it had approximately 10 percent of the digital music player market. SanDisk was formed in 1988 and is located in Milpitas, California. It employs more than 1,000 people. SanDisk manufactures flash storage cards and its products are used in MP3 players as well as in digital cameras, digital camcorders, mobile phones, and game consoles. SanDisk is the only company that has the rights to both manufacture and sell every major flash card format. The company generated $3.2 billion in revenues for the fiscal year ended December 2006.

Creative Labs, Inc.

This company is the U.S. branch of Creative Technologies, Ltd. In February 2007 it had approximately 2 percent of the digital player market in the United States. Creative Technologies was founded on July 1, 1981. The company's global headquarters is based in Singapore and its U.S. branch is in Milpitas, California. The company employs 5,000 people and had revenues of $1.1 billion in 2006. Beginning as a computer repair shop installing add-on memory for the Apple II computer, the company made sound cards and other multimedia products in the early 2000s. Creative Zen is Creative Technologies' most lucrative creation. The Zen Vision: M model was released in December 2005 and won the Consumer Electronics Show Best of Show and Best of MP3 Players awards, the CNET Editor's Choice award of January 2006, and the Red Dot Design award. The Zen Vision W was released in August 2006. It offered a larger screen than the Vision:M and included an FM radio.

Sony Corporation

This company has a small presence in the market with its Walkman line of MP3 players. The company employs 158,500 people and had revenues of $63.8 billion in 2006. While the company has a well-established brand in the electronics market, it has stumbled in the MP3 player arena. It abandoned the awkward technology used in early models and was looking to gain a larger market share of hard-disk MP3 players in 2007. It remained competitive by offering modestly priced models.

MATERIALS & SUPPLY CHAIN LOGISTICS

All MP3 players are constructed of electronic components and display screens. Most MP3 players also have plastic buttons or click wheels that allow the users to access the functionality of the device. In the case of the iPhone and the iPod Touch, the click wheel has been replaced by a touch screen. These components are encased in a covering, usually made of plastic. The batteries for these devices are usually rechargeable.

Most companies that market their brand of MP3 player do not manufacture any of the parts for the players. Eight different companies are involved in the production of the components of the popular iPod line, for example. One exception is SanDisk which manufactures flash storage cards. Many companies outsource the production of the parts of their players. These partnerships may be difficult to maintain over the long term. For example, Apple had difficulty obtaining drives for its iPod and iPod mini in 2004. The wait time for a consumer was approximately six weeks.

Samsung markets its own line of MP3 players. However, as of the second half of 2005, Apple Inc. bought 40 percent of the NAND flash memory chips produced by Samsung. According to iSuppli, 77 percent of the cost of materials for the iPod nano was for its integrated circuitry.

A few analysts claimed that Apple's materials costs are too high. This may have been true, however, the company does not claim to lose money with the sale of its iPods. By way of comparison, it is worth noting that Sony reported losing money on every new Playstation 3 video game console that it sold. Apple's cost may be expected to decline as the volume of iPods it sells increases. Flash memory prices are expected to fall in the later years of the first decade of the twenty-first century. Apple is also expected to use smaller semiconductors in its future iPod models; semiconductors that use power more efficiently than the ones used in its first iPod models.

DISTRIBUTION CHANNEL

Much of Apple's dominance within the MP3 market rests on distribution strategy decisions it made in the early 2000s. In 2004, for example, Apple announced plans with Chinese computer maker Founder Technology to have Apple's iTunes software preloaded onto its computers. Another example of Apple's distribution strategy is manifest in its agreement with Wal-Mart. Retail giant Wal-Mart started selling the iPod Shuffle in its stores in early 2005; it had previously sold few Apple products. Several analysts made note of this rather strange pairing. Wal-Mart is known for steep discounts on the products it sells; Apple tends to aim for higher-end, more technologically-savvy shoppers. What makes the positioning of Apple's iPod in Wal-Mart stores unusual for another reason is the fact that Wal-Mart's own online music store features music downloads in a Microsoft format that competes with Apple's format.

Apple Computer also struck deals with Target and Best Buy to sell iPods and other Apple products. Such relationships are important. Retailers sold $6 billion in MP3 players in 2006. Many shoppers will purchase their first MP3 player or computer at a discount merchandiser or electronics chain. Best Buy, Wal-Mart, Circuit City, Dell, and Target were the leading consumer electronics retailers in the United States in 2005. These five chains alone reported $75.7 billion in electronics sales. By way of comparison, Apple Computer Stores reported electronics sales of $2.7 billion in 2005.

Apple's decision to sell gift cards for its iTunes store in grocery stores, convenience stores, and drug stores is another strategy that has proven successful. One of Apple's biggest moves was to allow Hewlett-Packard to resell a Hewlett-Packard branded version of the iPod in 2004. Hewlett-Packard announced plans to stop selling its version of the iPod in 2005. Apple released the Windows-based version of its iTunes jukebox software in October 2003; before this, only a Mac version was available. Again, this was a sensible move on Apple's part, considering Window's control of the global operating systems market. At the conference to make this announcement, Apple CEO Steve Jobs pointed to the words "Hell Froze Over" projected on an overhead screen. It was a humorous acknowledgement of the long-running battle between the Mac and Windows operating systems.

KEY USERS

Several manufacturers developed MP3 players but it was Apple that managed to develop a music player that worked well and was attractive enough to spark consumer interest. The formidable advertising campaign that accompanied the introduction of the iPod was an important feature of its early success as well. The iPod quickly took control of the market by being well promoted, sleek, and portable. Consumers love portable players because they are lighter and smaller than portable stereos and CD players. The ability to put the contents of one's CD collection onto a device the size of a deck of cards (or smaller) is also an attractive feature.

The MP3 has not yet become a consumer staple, however. Nielsen Media statistics show that only 26.7 percent of U.S. households reported owning an MP3 player in the third quarter of 2006, far below the 81.2 percent that reported owning a DVD player or the 75 percent that owned a cellular phone. Nonetheless, the fact that only 7.6 percent of households reported owning such a device in the third quarter of 2002 speaks to the industry's rapid growth.

Key users of iPods tend to be young. Young people are often more comfortable with computers and the online world than other age groups. The Pew Internet and America Life Project conducted a survey in April 2005. In the survey of 2,201 people, 19 percent of those 18-28 years of age owned an MP3 player, 14 percent of those 29-40 years of age, and 11 percent of those 41-50 years of age owned an MP3 player. Only 6 percent of respondents in their 50s and 60s claimed ownership and 1 percent of those 70 years of age and over owned an MP3 player. Note that this survey does not include those younger than eighteen.

ADJACENT MARKETS

Sales of music players drive sales for other products as well, such as hard disks, flash memory, display panels, and electronic components. Any new, successful electronic product creates a market for accessories. MP3 player accessories include speakers, power adapters, car kits, cases, power cords, docking stations, and adapters. U.S. consumers spent $412 million on accessories in the first nine months of 2005, a 370 percent increase over the same period in 2004, according to NPD Group. Speaker systems were the most popular item, followed by display cases and bags.

The interest in digital players has also given birth to podcasting. In podcasting, a media file is distributed over the Internet for playback on portable audio devices. These broadcasts are often similar to syndicated radio broadcasts. They often have a host and are devoted to a particular topic. Internet broadcasts existed in the late 1980s and in the 1990s. But the term podcast did not appear until the introduction of Apple's iPod, the device on which so many of these broadcasts would be played. Analyst eMarketer estimated that 10 million people listened to a podcast in 2006 and that this figure might rise to 50 million in 2010. The podcast's active audience—those who download one or more per week—is thought to be much smaller. The firm estimated that 3 million people were listening regularly to podcasts in 2006 and that 15 million people may be regular listeners by 2010. Advertisers, of course, love having a new form of media on which to advertise. Ad spending on podcasts was forecast to climb from $80 million to $300 million over the same period.

RESEARCH & DEVELOPMENT

Research continues into MP3 compression technology. The Frauhofer Institute, the first to patent such technology, was at the front of the pack. In 2007 they introduced a new MP3 surround sound streaming module that allowed manufacturers to build Web radios featuring 5.1 channel surround sound. This allowed MP3 Web radios to introduce surround sound in a more compact and cost-efficient manner. The file size was approximately the same size as 2 channel stereo files and it was backward compatible with MP3 players that could previously only play 2 channel stereo files.

A popular theme in analyst circles and in exchanges in online chatrooms was a discussion of what would break the dominance held by the iPod. As it turns out, what may break the dominance of the iPod may be another Apple product: the iPhone. Steve Jobs announced the launch of Apple's iPhone in January 2007. The device is a smartphone, iPod, and mobile Web browser. It came in 4 gigabyte and 8 gigabyte models, was initially priced at $499 and $599, and was available in June 2007. In September 2007 the price of the 8 gigabyte model was lowered to $399 as the 4 gigabyte model was phased out. Steve Jobs demonstrated all of the phone's innovative features at the Consumer Electronics Show in January 2007. He boasted that the device was five years ahead of every other smartphone. Apple predicted, upon the launch of the iPhone, that its sales would reach one million within the first seven months on the market.

Capitalizing on the popularity of the iPhone's touch screen, Apple introduced the iPod Touch in September 2007. This was the first iPod to offer wireless technology. Users no longer needed a computer to download songs from iTunes to their iPod. But it remains to be seen whether this iPod will be as popular with the public, or if consumers will spend $100 more to buy the iPhone and get all of the features of the iPod Touch plus a phone and digital camera.

CURRENT TRENDS

The iPod dominates the music player market. According to a 2006 survey by In-Stat, 49 percent of MP3 owners owned an iPod. However, users complain that the devices are easily scratched and that certain models have been discontinued too quickly. Others have insisted that the iPod and its sensitive hard drive are too delicate, expressing surprise the device is damaged when dropped or jammed into a teenager's crowded bookbag. Many of the complaints against the iPod have to do with its short battery life. The typical iPod battery life is 18 hours, according to Apple. Regular users insist that the battery retains its charge for a fraction of this time.

The battery issue is further complicated by the fact that the iPod is not designed for a user to change the battery. It must be sent back to Apple, who offers a $59 battery replacement service, a service that was originally $99. Apple lowered the price as part of a class-action lawsuit filed against the company in 2004 accusing the company of misrepresenting battery life in the iPod. Some frustrated iPod owners think this arrangement is really about persuading customers to simply buy more iPods. It is possible to purchase a battery changing kit on the Internet and change the battery oneself, although the process is cumbersome.

In 2006 Apple faced more lawsuits. John Kiel Patterson filed a class-action lawsuit alleging iPods are "inherently defective in design and are not sufficiently adorned with adequate warnings regarding the likelihood of hearing loss." The lawsuit states that the iPod can generate more than 115 decibels, a level that could damage a user's hearing if exposed to this decibel level for more than 28 seconds per day. It was unclear whether the Louisiana man had suffered hearing loss because of the iPod. The man's lawyer insisted this was not the point. The lawyer argued that the product's potential decibel level made it a defective product, and that his client was "paying for a product that's defective, and the law is pretty clear that if someone sold you a defective product they have a duty to repair it." Apple, in response, released a software fix to lower the maximum decibel level possible on the iPod. Another lawsuit, filed in March 2007, alleges Apple violates antitrust lawsuits because music purchased on iTunes will not play on digital players that are not iPods.

TARGET MARKETS & SEGMENTATION

Other industries have begun integrating the digital players into their production plans. Some sports apparel include special pockets designed to hold the iPod. Portable and home stereos are now being equipped with iPod docks. Two-thirds of 2007 model cars allow MP3 players to connect to factory-installed stereo systems.

Many analysts predict the digital player market will begin to decline by 2010 and that prices will fall. One such industry analyst, The Yankee Group, predicted that more of the market will be driven by replacements in the latter part of the first decade of the twenty-first century. It estimated that 43 percent of digital players sold in 2006 were sold to first time buyers; by 2010 they expected 5 percent of purchases to be made by first time buyers. Industry watchers anticipated that future consumers will be looking for devices that have a number of functions integrated into a single device: phone, Web browser, portable music, video, and photo album.

RELATED ASSOCIATIONS & ORGANIZATIONS

Apple, http://www.apple.com

Digital Media Association, http://www.digitalmedia.org

Recording Industry Association of America, http://www.riaa.org

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