Portable Media Players Face Competition

The Diffusion Group predicts that portable media players will face stiff compeition from less-expensive application-specific alternatives such as MP3 players, portable DVD players.

According to research consultancy The Diffusion Group, while PMCs offer consumers an “all-in-one” package, its $500 price tag will make single application devices much more attractive to consumers.

“The most unique function of the PMC is its ability to store and playback digital video,” says Dale Gilliam III, analyst with The Diffusion Group. “But given that the penetration of PVRs among U.S. households remains poor and the PVR value proposition remains lost on most consumers, demand for a portable PVR is likely to remain very low for the next several years.”

“Additionally, there are several portable PVR-like alternatives now available that are much less expensive than PMCs and better suited for storing and viewing video content,” continues Gilliam. “If viewing TV content is perceived to be a primary driver for PMC adoption, portable TVs are now much less expensive and optimized for portable video viewing. On the high-end, Sony’s new LF-X5 offers live digital TV viewing with integrated Wi-Fi connectivity and a 7-inch viewing screen. While cost prohibitive for most consumer (carrying a price of more than $1000), we expect the price of these units to drop to around $500 within 24 months.”

Of course, PMC proponents could make the same argument – that PMCs will likely enjoy the benefits of technological innovation and rapid price reductions, thereby making the converged device much more price competitive with application-specific alternatives. Moreover, promotional strategies on the part of Microsoft and its hardware partners are likely to be aggressive, especially given the tie in between PMCs and Microsoft’s Media Center PCs. Between rapid declines in material costs and aggressive promotional strategies, TDG anticipates that the price of portable media centers will decline by more than 50% to below $250 by the end of 2006.