Apple's iPOD arrived in October 2001 as a disruptive technology in the portable audio industry. Sony the incumbent portable music devices leader failed to match Apple. Since iPOD's launch it has sold over 2 million units and captured over 31% market share. The innovators were 'Apple' loyal Mac consumers. Apple then targeted other customer segments, non-Mac MS-Windows users and more recently price-sensitive users with a stripped down iPOD, the iMini.
             Our paper discusses why Sony hesitated to enter the market –its fear of music piracy and erosion of Sony Music's revenues. We consider the Sony organisation, its effect on Sony's leadership in portable music and Sony's recent actions to catch-up. We look at Sony's soon to be released innovative PSP player and Sony's platform challenge to the iPOD, their technology strategy and their impact on market adoption.
             The global market for portable music players is valued at US$15.5 billion and has been relatively stagnant for over 10 years. Some country differences exist: China, the largest market has grown consistently during the period, while Japan, the second largest market has been shrinking. Traditional products such as Sony Walkman, Discman and portable stereos have dominated, with Mini-Disc (MD) technology gaining traction in the late 1990's, enabling Sony to achieve market leadership with 16% share, followed by Pioneer and Kenwood with 7% each. In 2003 mp3 accounted for 3%-5% of the total player market or 3.5 million, (US$600 million in sales). It is currently growing at 7 times the rate for overall market and this rate is increasing by 50% per annum. iPOD, a relatively late entrant, has captured the mp3 market.
             Sony has traditionally led the portable music devices industry with innovations such as the pocket radio, the Walkman (cassette), the CD Walkman and more recently the Mini Disc. Sony maintained successful shift...