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The Wild Wild World of MP3 : Acquisitions, agreements, new recordable players and more - Diamond Multimedia's Rio MP3 player acquired by S3 - Company Business

San Jose-It's almost impossible to keep up with the changing landscape of digital downloadable music.

Almost every week there are numerous indications that this market is growing substantially regardless of the legal and political moves the major recording studios have used to prevent users from recording high-quality versions of copyrighted music.

The leader in this market, Diamond Multimedia's Rio MP3 player, was recently acquired by S3. S3 will control the Rio as well as the revenues from sales of the chips and boards, which have been expanding for the past six months.

According to Ken Potashner, chief executive officer and president at S3, Diamond is shipping 100,000 units a month. At that rate, the Rio will pass numerous other consumer electronics devices in sales whithin in a year, Potashner said.

"This is a market that we will continue to invest in and observe closely as more artists make their music available on the Internet and as more standards are established," said Potashner.

No de Janeiro

However, the Rio has some competition in the immediate form of the Nomad, Creative Technologies' version of a digital downloadable MP3 player. The Nomad was released late in the second quarter with both a 64Mbyte and 32Mbyte version. Diamond also recently released its 64Mbyte version of the Rio.

The Rio and the Nomad are only the beginning, however. There are literally dozens of companies developing or soon to be introducing MP3 players to take advantage of this expanding market. Pine Technology USA Inc., Fremont, Calif., two weeks ago introduced its Dmusic MP3 player priced at $219 with a built-in LCD display, parallel ports, and 32Mbytes of Flash memory. The player also comes with a FM radio integrated inside. This is only the first of numerous players that will be on the market before the end of the year it appears.

Some of the biggest news comes out of Sony Music who recently agreed to team up with Digital on Demand Inc. to permit music from Sony artists to be downloaded directly to retailers. Retailers will be able to take an MP3 player and then download the Sony music to their player for listening. The user would also get the liner notes and cover art for the album as well, once it has been paid for.

Now that the MP3 format players have agreed to develop an encryption technology, Sony should be well off to protect its artists while keeping up with the growing demand for digital downloading of music. Sony isn't the only one to hop aboard the digital music bandwagon.

Cable Gets Busy

Cox Enterprises Inc. has taken an equity investment of $45 million in MP3.com, an Internet Web site dedicated exclusively to supplying MP3 music files for free to Internet surfers while offering CDs of these bands for sale.

Cox and MP3.com said they will create and operate music-related Web sites focused on MP3 and advancing the technology to include more well-known artists like Alanis Morissette and Tori Amos, who have agreed to put live performances on MP3.com recently.

MP3.com also plans to go public soon and is one of the front line participants in the battle against the traditional music business. The Web site helps unsigned, not popular bands get a start by putting the content on the Internet. The company takes a 50 percent cut on the song sales compared to an 85 to 90 percent cut taken by major record labels.

MP3 faces challenges, however, from companies such as Microsoft Corp., AT&T Corp., IBM Corp. and Liquid Audio Inc. who all have alternative compression formats that all claim to be better than MP3 on various technological levels.

New Kid on the Block

Liquid Audio, Washington D.C., recently said it would go public this month. Already Intel Corp. has bought an 18.1 percent share before the offering and Vulcan Ventures taking a 7.2 percent stake.

Amazon.com has also taken interest and recently launched a page on its Web site where users could download popular music performers such as Sarah McLachlan and Lyle Lovett using their format. Amazon.com has an option to take a 10 percent equity stake in Liquid Audio as well.