Downloads reveal upside to MiniDisc potential - Brief Article

DSN Retailing Today, May 1, 2001 by Laura Heller

The digital music craze and search for affordable media storage have breathed new life into an existing, and not very prominent, product category: the MiniDisc.

First introduced in 1992, MiniDisc has suffered from fits and starts even as newer portable technology captured the limelight. Portable CD units and now MP3 players have taken the lions share of shelf space, advertising support and, subsequently, sales at retail. But MiniDisc seems poised once again for a break out with an unexpected demographic: Generation Y.

At its inception, Sony Consumer Electronics, which developed the format, had high hopes. For the first time, it allowed consumers to record music from multiple sources in a compact, extremely portable size. MiniDisc predated CD burners, and consumers were finally offered a way to record music mixes on a hard disc format.

But at this time, music sources were limited; consumers were put off by the high price points and the need for multiple units to record and play Mini-Disc in the home, car and on the run. But with the advent of digitally downloading music from the Internet, MiniDisc may have finally found its niche at last.

According to Tracy Farrington, marketing manager for portable MiniDisc at Sony, new advances in the technology coupled with digital music trends may have finally given MiniDisc wings. New units introduced last July featured an analog PC link that allows for the transfer of music from the Internet and a long play mode, which permits one MiniDisc to hold up to 2.5 hours of music. Skip-protection technology was also incorporated into the unit, making it more practical as a portable player.

Perhaps more importantly is the fact that Sony has finally managed to bring its price points down; they are now more in line with other formats. Like the planets aligning for success, all these factors have added up to make MiniDisc the portable unit of choice among the younger set.

According to NPD Intelect, MiniDisc was the No. 1 selling portable digital music player on the market December through February, the last three months data is available. Just two months after its introduction, it had jumped to the No. 2 spot in that category.

"We're seeing this product increase in sales velocity as there's more and more increase in use and interest in digital recording," said John Keating, director of merchandising at The Good Guys.

"We've seen that the PC link is giving new lift to MiniDisc," confirmed Jim Hirschberg, director of consumer electronics for NPD Intelect. "Particularly among young people who download a lot of music from the Internet."

Previously, typical MiniDisc customers were early adopters, baby boomers and the older members of Generation X--demographics that didn't balk at the higher price points and need for multiple units. But last year, Sony managed to bring the price points of its portable units down to around $200, just as the Napster craze and all things MP3 was cresting.

Blank MiniDiscs retail for approximately $2, as compared to more than $100 for blank flash media with comparable capacity. And the format records multiple digital formats and works with all organizational software programs, making it even more appealing to young, budget-conscious consumers.

"We've taken it from a higher consumer to a Generation Y consumer," said Farrington. "It's really opened up a new opportunity to market to these kids." Nearly 50% of the customer inquiry cards returned to Sony from MiniDisc purchases are now coming from students under the age of 25.

To this end, Sony has developed a TV campaign that ran exclusively on MTV and a print ad that is making the rounds in Teen People and Rolling Stone. The programs will be continued as both Sony and Sharp Electronics roll out new units with additional features and even lower price points in an effort to capitalize on this new customer base.

New units from Sony feature a digital PC link with enhanced functionality and even longer play--up to five hours of music on one disc--for $249.95. Units with the analog link are now priced at $179.95. Sharp plans to release four new portable models all with the long play mode and a Universal Serial Bus (USB) connector cable. In the future, the company is looking to build USB ports in the portable units, said Art McKinnon, audio marketing manager for Sharp.

New merchandising is also helping to give the category a lift. Sony's portable units are now being released in clamshell packaging, allowing retailers to more easily merchandise the products on pegboards alongside other portable units that play CDs or tapes.

Although retailers have been devoted to the category for years, MiniDisc required more explanation and personal service than some could successfully offer. Today's youth with its built-in technological savvy and intuitive understanding of digital media make the format a much easier sell. "Customers are understanding it," said Farrington. "They are coming in and asking for it."

"MiniDisc has been especially profitable since [the release] last year," said Keating. "Sales over the last year have just exploded, and the PC link has made it much easier to use and much simpler to understand."