Ipod Takes Japan by Storm Page 1 of 2

iPod Takes Japan by Storm Page 1 of 2 Close Window FEBRUARY 24, 2006 TECHNOLOGY By Ian Rowley iPod Takes Japan by Storm The Godzilla of digital-musical players far outsells rivals from local consumer-electronics giants like Sony. After all, it's so kawaii (cute) Spend any time hanging around Tokyo's bustling Shibuya retail and fashion conclave, and you will doubtless see electronic shops galore hawking MP3 players such as Sony's (SNE ) Walkman, Toshiba's Gigabeat, and the Panasonic D-Snap brand. Yet a determined young couple on hand recently -- Megumi Mizuno, 22, and Takaaki Tokuyoshi, 17 -- bypassed them all, making a straight shot to the Apple (AAPL ) outlet. Why? They've been infected by the near-global iPod obsession. "The iPod design is cool," says Mizuno, a college student majoring in psychology, who wants a replacement for her aging mini-disk player. Tokuyoshi, meanwhile, is looking for a step up from his DoCoMo (DCM ) mobile phone, which he currently uses to listen to music. "iPod's sound quality is better, and the cell-phone battery doesn't last long enough to enjoy listening to music," he says. "The prices are reasonable, too." The iPod nano, with 4 gigabytes of memory, retails for about $230 in Japan. It seems iPod mania is alive and well in Japan -- one of the most competitive consumer-electronics markets on the planet. Despite an array of well-entrenched Japanese rivals, such as Sony and Matsushita (MC ), the iPod had cornered 51.3% of the digital-music player market as of the end of 2005, up from about 32% in 2004, according to research firm BCN. Sony was a distant second with 16.2%, while Panasonic grabbed just 8.2% of the market. SLICK MARKETING CAMPAIGN. Others have exited the market entirely. In November, Olympus (OCPNY ), maker of the m:robe music player, pulled its product. D&M Holdings, owner of the Rio brand, exited the stage in August. Apple's killer market-share grab is even more impressive when you consider that the overall Japanese market for music players shot up 50% to 4.2 million units in 2005. "Suffice to say, iPod has been a huge success," says Hiroshi Kamide, an analyst at KBC Securities in Tokyo. Japanese consumers, much like their U.S. counterparts, are jazzed by iPod's sleek and hip design, easy-to-use functions, and first-class software -- something local rivals have yet to match. "Apple has focused on developing a seamless, end-to-end experience for the consumer when it comes to portable music," says Jon Erensen, a senior research analyst at Gartner Dataquest. "Other companies, including the Japanese consumer-electronics giants, have been focused on one or two pieces of the equation." Sony, for example, has received plaudits for design and sound quality, but criticism for its Connect software. Slick marketing has helped, too. In January the Nikkei Marketing Journal named Apple's TV advertising campaign for iPod the best of 2005. Another big boost has been the August rollout of a Japanese version of Apple's iTunes Music Store. The company also opened the brick-and- mortar store in Shibuya -- Tokyo's vibrant youth center. A month later it introduced its best-selling, ultra-slim iPod nano to Japan. MOBILE-PHONE THREAT. Still, iPod's continuing dominance in Japan isn't a sure thing. For starters, Sony isn't giving up the chase. Its new Walkman, which will be released in the U.S. this year, has been well-received in Japan. Analysts say Sony's working hard to improve the software. What's more, downloads from Mora, a Japanese download service backed by Japan's major music labels, including Sony, grew rapidly in 2005. Last December, for the first time, it topped 1 million downloads in one month. That's a 190% increase over the year-ago period. One advantage Mora has over the iTunes Music Store is access to Japanese pop talent. Apple doesn't have tie-ups with some of the biggest local record companies, such as Sony Music Entertainment (Japan) and Warner Music Japan. A bigger threat is the growing sophistication of mobile phone-based music in Japan. Cell phones are frequently discussed as potential iPod killers, and Japan's carriers are pushing the hardest to make that a reality. AU, a unit of KDDI, is particularly aggressive. Since November, 2004, AU customers have been able to download full songs from the carrier's 3G networks, using a service called Chaka Uta Full. As of mid- January, more than 33 million songs had been downloaded, and 5.9 million phones can access the service. STEPPED-UP QUALITY. In January, AU unveiled a new service called LISMO, which allows subscribers to supplement tracks downloaded over its 3G networks to cell phones with songs uploaded to their PCs. It also debuted some impressive musical handsets. One of them, made by Toshiba (TOSBF ), includes a 4-gigabyte hard drive capable of storing 2,000 songs. And in April, AU is adding an online music site called DuoMusic Store, which will enable subscribers to download tracks to their PCs or phones. Apple claims iTunes is the leading supplier of downloadable music via PCs in Japan. The music quality on mobile phones is improving as well. Tracks downloaded from AU's 3G network, for example, are compressed using the HE-AAC format, which stands for high-efficiency advanced audio coding, and is generally considered a step up from the MP3 format. On the latest products, "the music experience is very similar on a handset player," says Mark Kirstein, an analyst at research firm iSuppli. http://www.businessweek.com/print/globalbiz/content/feb2006/gb20060223_774050.htm 2/25/2006 3:54:01 PM.

Load more