Diamond Releases Portable MP3 Player

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September 14, 1998 (12:52 PM EDT)

By Malcolm Maclachlan,

Diamond Multimedia has created a new device that moves digital music off PCs and into consumers' pockets, marking the company's foray into a market where traditional consumer electronics companies fear to tread.

Diamond's Rio PMP3000 plays digital music in the MP3 format, and stores up to one hour of music. It will hit retail stores in October.

Rio has some advantages over traditional portable music players. At 3-by-2-by-5/8 inches, it is about the size of an audio cassette. It also has no moving parts, which Diamond says makes it better for use during sports and other activities, and it runs on a single AA battery for 24 hours of playing time.

At $200, the Rio costs $100 less than its main competitor, the MPMan from the South Korean company Saehan.

But what it lacks is content. Although MP3 is the most popular digital music format on the Internet, record companies are fighting it because it allows for creating an unlimited number of perfect copies of a song. Most hit songs are not available in the format legally.

Two years ago, the Recording Industry Association began shutting down sites that distributed MP3s illegally. The campaign continues today.

With the Rio, Diamond is bundling 100 songs from companies such as GoodNoise, an Internet record company. The best known artist in the collection is Frank Black, former leader of the alternative rock band The Pixies.

Diamond licensed the CD conversion and MP3 encoding software from Xing Technology. The software lets users record music off of CDs into MP3 format, which can then be stored on 32-megabyte flash memory cards.

Diamond doesn't need huge sales to make a profit on Rio, said Lorraine Comstock, director of marketing communications. MP3 is most popular among early adopters, she added, a group that includes many of Diamond's core market of computer users. Diamond also makes peripherals like graphic accelerator cards.

Rio represents a niche market, Comstock said. "Until it becomes a mass market, I don't think you'll see the Sonys of the world doing one." Sony would find it particularly difficult to, since the company also owns a music label representing big-name artists like Mariah Carey.

But MP3 needs a company like Sony behind it to gain momentum, according to Walter Miao, an analyst with Access Media International. The platform needs content to drive it, he said, but record labels are holding back the most popular music.

"The real issue for this whole market is whether the record companies and record publishers are going to sign on to a download approach," Miao said. "People want access to the key hits and most popular titles."

MP3's potential, he said, may have been cut short by the anti-recording industry's rhetoric against the format. The eventual successor, Miao said, might be another format that contains copyright controls, such as the CD streamer technology advocated by RealNetworks.