| NEW YORK, Sept 22
NEW YORK, Sept 22 In an age when consumers are
buying more and more songs by downloading to their portable
music player, SanDisk is betting that people still want to
actually grasp their tunes in the palms of their hands.
That wager might be a long-shot.
SanDisk Corp SNDK.O, the world's No. 1 supplier of flash
memory-based data storage cards, on Monday unveiled a new music
format called "slotMusic" -- a memory card smaller than a
postage stamp, preloaded with MP3-format music.
The format has been embraced by the four major music
companies -- EMI Music, Sony BMG (6758.T), Universal Music
Group (VIV.PA) and Warner Music Group WMG.N -- and new tunes
from popular artists are expected to be on store shelves in
this format in time for the holiday shopping season.
With the blessing of the music companies, as well as
leading retailers Best Buy (BBY.N) and Wal-Mart (WMT.N),
"slotMusic" appears to be the best-backed new music format
since the compact disc debuted in 1982.
SanDisk's format will take advantage of the fact that new
mobile phones are built to play music, and millions of phones
-- as well as many MP3 players and notebook computers -- have a
slot into which a card can be inserted. Missing from the group,
however, are Apple Inc's (AAPL.O) products, including the more
than 150 million iPods and iPhones that have been sold.
"Most non-iPod MP3 players already have card slots in them
... and music-capable phones with card slots are selling at a
rate of 750 million a year," said Daniel Schreiber, a senior
vice president at SanDisk.
The introduction comes as more and more consumers,
particularly younger shoppers, buy songs online, downloading
them directly from Web stores like Apple's iTunes or
Amazon.com. In fact, Apple boasts that since 2003, the iTunes
Store has sold more than 4 billion songs.
Meanwhile, the sparsely trafficked CD aisles in retailers
like Best Buy have shrunk to make way for more popular items
like cameras, mobile phones and music players. What is more,
the Internet has made it simple for many to share and exchange
music via online services -- some illegal -- for free.
SERVING THE NON-IPOD CROWD?
SanDisk, which counts itself as the No. 2 maker of portable
digital music players, says putting songs free of
digital-rights-management restrictions on the 1.1 gigabyte card
in a high-fidelity rate of up to 320 kilobytes-per-second
(kbps) makes the music instantly available to users without
high-speed Internet connection or a PC.
It also eases access to those who can get on the Internet
but do not have a credit card to purchase music online.
The conundrum for SanDisk is that the very audience it
would most love to endorse this format -- young people who use
their mobile phones and portable computers as social and
educational lifelines -- are already comfortable buying songs
online, eschewing physical CDs, according to Danielle Levitas,
an analyst at research firm IDC.
Also, the growing trend among that demographic is to
purchase only the songs they like, one at a time, for about $1
-- shunning albums.
Indeed, it is older music lovers who may still prize the
tactile experience of owning physical music. But they are not
likely to be the catalyst for "slotMusic's" growth.
"Internet-based distribution is not for everyone. But the
(demographic) segment that values physical media the most isn't
the one that spends the most on music," Levitas said. "I get
why they (SanDisk) are doing this, but I just don't know that
it adds up into a compelling business."
Levitas suggests that at best "slotMusic" may help slow
slumping sales of physical music media.
During the first six months of 2008, unit sales of CDs in
the United States plunged 16.3 percent, according to Billboard
magazine. Total albums sold declined only 11 percent from the
same period a year ago, to 204.6 million units, helped by a
34.4 percent jump in digital albums. At 31.6 million units
sold, they accounted for 15.4 percent of album sales.
SanDisk's Schreiber insists that there is still plenty of
opportunity in the sales of physical music, adding that the
predicted disappearance of the CD echoes the false notion that
networked computers would someday create a "paperless office."
"The CD is dying, but rumors of its death are perhaps
somewhat premature," he said. "People are spending more money
on CDs than any other format. There are hundreds of millions of
music CDs shipping every year."
Details of slotMusic albums' availability and pricing will
be announced in coming weeks. A similar launch is expected in
Europe, but not until next year, Schreiber says.
(Editing by Gary Hill)