Will Portable Video Devices Kill The MP3 Star?

Don’t start drafting the eulogy just yet, but the die is cast: The portable-device market is tilting toward video — and sooner than you might think, according to In-Stat research.

The shift, which will see shipments of video-enabled portable media players (PMPs) overtake shipments of audio-only MP3 players by the end of 2008 with a 58 percent share of the market, is projected despite lackluster consumer demand for video capability.

Only 11 percent of respondents cite video as the chief feature they look for in a PMP.

“I still think that these devices are going to be purchased primarily for audio,” Stephanie Ethier, senior analyst with In-Stat, told internetnews.com. “But as they become more educated, people are going to get into video and its different uses,” she said. One of those uses is “connecting the PMP to the big screen at home. That business model could become more compelling once people figure out how to do it.”

In the meantime, as manufacturing costs drop, video capability will become commonplace in PMPs, irrespective of demand, Ethier said. For example, the digital camera inside the cell phone, she added, is a feature that became standard-issue long before many consumers cared or even knew about.

Stephen Baker, analyst at the NPD Group, sides with Ethier. “Most of the reason that people want more video is because we tell them that they need it,” said, he told internetnews.com. “It doesn’t have anything to do with how much people are using it.”

Even with manufacturing costs declining, however, Baker maintains that the price point of a unit with a decent screen and sufficient memory (even if it’s Flash-based) is still prohibitive for many consumers.

So aside from the video-audio debate, who’s winning in the overall PMP space? It’s not even close, according to Ethier.

“Apple is the runaway leader,” she said, with SanDisk and Creative as distant also-rans. “Of all the PMP owners, the large majority own an Apple iPod. For those going to purchase one in the coming year, most said Apple.”

“The multimedia cell phone is becoming a very viable threat,” Ethier said, though she is quick to disagree with analysts who look to the smartphone as the death knell for the PMP.

In-Stat’s technology adoption panel of survey respondents skews toward older, higher-income males, most of whom identify themselves as early adopters. In projecting the shift toward video, In-Stat excluded game-centric devices, such as Sony’s PSP and smartphones from its definition of PMPs.

Even by that narrow definition, the market is poised for substantial growth. Shipments of audio-only MP3 players and PMPs are together expected to hit 275 million units by 2011, compared with 186 million in 2006, according to the In-Stat report. The 51 percent increase is attributable to declining prices, increased broadband deployments and the proliferation of audio and video content online.

Even though many of respondents in the In-Stat survey group own music-enabled phones, “they’re not using the music function,” she said. As video uptake increases, the PMP is likely to strengthen its market position in the face of competition from smartphones, Ethier said, citing their larger screen sizes, better resolution and larger memory. “They do compete, but there are still reasons for buying one over the other.”

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