Rio plans a comeback with a slate of new audio players

<br>SAN JOSE, Calif. (AP) _ Rio Audio, the pioneer of the portable MP3 audio player that lost luster under the financial woes of its former owner, is throwing itself back into the heated market. <br><br>Under

Monday, August 11th 2003, 12:00 am

By: News On 6

SAN JOSE, Calif. (AP) _ Rio Audio, the pioneer of the portable MP3 audio player that lost luster under the financial woes of its former owner, is throwing itself back into the heated market.

Under its new parent company, Digital Networks North America, Inc., Rio was debuting Monday a lineup of seven new music players that will begin shipping this month.

Most are sequels, including a 20-gigabyte hard-drive device called the Rio Karma that will compete against the popular Apple iPod.

One device, called the Rio Nitrus, is different. It is among the first portable players to use a quarter-sized hard drive that stores 1.5-gigabytes, or about 25 hours, of music. The small drive allows the gadget, priced at $299, to be slightly larger than a microcassette but angled like a matchbook so it slips easily into a pocket.

``We want to regain the dominance we had in the market,'' Jeff Hastings, Rio's president, said in an interview.

In 1998, Rio, then a part of Diamond Multimedia Systems, was the first to introduce a commercial MP3 player, just as music in the compressed MP3 format was becoming widespread on the Internet. The recording industry unsuccessfully tried to squelch the Rio 300, losing its lawsuit against Diamond in 1999. A week after the court ruling, Rio was sold for $173 million to a company that eventually renamed itself SONICblue.

Rio players, which relied on flash memory and did not have any moving components, fast became a common sight at the gym, or on joggers.

But as other flash-based portable players flooded the market, Rio struggled to fend off rivals, including Creative Technology, maker the Nomad line of players, and big-name consumer electronic companies like Samsung.

SONICblue's financial troubles limited Rio's marketing power and inventory. By the time SONICblue filed for bankruptcy protection in March, Rio players were hardly existent on store shelves.

Meanwhile, more contenders have entered the market with new kinds of audio products to tap the consumer shift toward digital music.

The portable music player market in the United States is expected to grow to 19.3 million units in 2007 from 5.5 million units in 2002, according to the market research firm IDC.

Apple introduced its iPod in October 2001, igniting a category of portable players with hard drives. Though it was bulkier than flash-based players, the pocket-sized iPod could hold hundreds more songs _ about 1,000 songs _ with its 5-gigabyte drive. The latest models now have as much as 30-gigabytes of storage.

RCA/Thomson introduced a player in June that uses the same 1-inch hard-drive as Rio's upcoming Nitrus. And, Gateway last week made its MP3 player debut with a flash-based gadget about the size of a pack of chewing gum.

Despite the crowded field, Rio ``will be a worthy competitor,'' said Tim Bajarin, analyst of market consulting firm Creative Strategies.

``The Rio brand name really defined the flash-player category and the brand still has cache with consumers,'' said IDC Susan Kevorkian.

The 20-gigabyte Rio Karma, which is squarish and roughly the size of a Klondike ice cream bar, will cost $399. Like many players, it can connect to a computer via a USB cable, but it also features a docking cradle that has an Ethernet port for connection to a home computer network with or without wires.

Rio says it is the first portable player to also support the compressed music format called Ogg Vorbis, created by the open-source community.

Rio's other new products will be five flash-based players with either 128 megabytes or 256 megabytes of memory, ranging in price from $129 to $199.