China''s MP3 Market Slows Down； Rm/Rmvb Format Video Produc(2)

The continuous enrichment and diversification of MP3 functions are a logical outcome of market growth. The market leads consumption. As portable MP3 players diversify and consumers show more diversified demands, MP3 players with only basic functions can no longer meet consumer demand. Many vendors will therefore shift their efforts to the video MP3 field. Pure audio MP3 has gradually reached the small mass market. However, it still has growth potential and room for market growth.

In 2007, big screen, big capacity and multifunctional video MP3 players were still the MP3 market segment of greatest attention in China. User groups further segmented. Market competition also gradually shifted from solely price wars to competition based on brand strength.

Fig. 1 Sales Volume and Its Growth in China''s MP3 Player Market, 2005-2007 Source: CCID Consulting, Jan. 2008

As the market of 2007 closed its curtain and the more promising year of 2008 entered, China''s overall MP3 player market showed the following major features in 2007:

The pure audio MP3 market is highly concentrated; foreign brands have the advantage

In 2007, 49.8% of China''s pure audio MP3 player market was concentrated in the hands of the top 5 brands, namely Samsung, Apple, OPPO, Sony and UNIbit. Of these 5 brands, foreign brands accounted for 36.3%. These figures fully show that in the pure audio MP3 field, foreign brands have advantages.

In the face of a declining pure audio MP3 market and increasingly thin product profits, differentiation is the key to MP3 brands'' survival. In essence, the process of differentiation is a process of innovation. Its key lies in the ability to look for blank spots in the market, tapping potential personalized demand, innovating product functions and added service values by innovating brand values and providing users with new consumption experiences. This will allow enterprises to expand their differentiation through continuous innovations and establish greater competitive advantages. As the origin of marketing, product differentiation directly affects the survival of brands.

Though the pure audio MP3 market in China has been gradually shrinking, foreign brands such as Samsung and Apple continue to introduce new products with their own styles in an effort to meet consumers'' diversified demand. Their differentiated competition have all won them good performances in the market.

Fig. 2 Sales Volume in China''s Pure Audio MP3 Market in 2007 by Brand Source: CCID Consulting, Jan. 2008

"Small size, elegant appearance and fashion" become the development directions for pure audio MP3 players

In 2007, the hot sales of video MP3 players caused a major impact on pure audio MP3. However, enterprises such as Apple and Samsung still adhered to their long culture and continued to create a "music culture" for their products. In terms of appearance, small size, elegant appearance and fashion became the marketing spots for pure audio player products.

Fundamentally speaking, if a product or an industry does not want to be replaced or eliminated by the market, it must have a unique competitive edge. In addition, clear positioning is needed for the product. For pure audio MP3 player vendors, creating more "music" culture attached to their products and brands is very important. Listening anywhere at anytime should be the primary function of their products. "Small size, elegance and beautification" should become the future development directions for pure audio MP3 player products.

Big screen video MP3 is the mainstream; HD becomes the development direction

Video MP3 players make up the main part of MP3 player sales. As technology continues to advance, video MP3 players have seen their screen size grow from 1.0 inch at the beginning to 1.8 inches and then topping 3 inches. As screen size continues to hit new records, the mainstream products in the market have also changed. CCID Consulting''s monitoring data shows that 2.0-2.4 inch video MP3 products have gradually gained a mainstream position, accounting for 60.2% of the overall sales volume.

Major MP3 vendors have never given up making screen improvements. This is not only reflected in screen size upgrading. In terms of selection of screen texture materials, they have also more tailored to consumers'' desire for a high-quality digital life. Big screen and HD are the development directions in the whole video MP3 market.

Fig. 3 Sales Volume in China''s Video MP3 Market in 2007 by Screen Size Source: CCID Consulting, Jan. 2008

Products under 500 Yuan dominated in the market