When Tai Hua holdings are still celebrating, Kameda Masao and Heitaro Nakajima discuss their new competitor strategies.

  Apple had entered the portable music player industry and had just launched its music player, iPod, today.

  This music player is using a new music format. It is not using the traditional MP3 format for songs and can convert CD to this format.

  Apple had not developed this technology. Two software engineers developed this technology but were acquired by Apple and use it on their PCs.

  Heitaro Nakajima and the rest were not concerned about them initially, as this new music format is nothing special. This format is not different from other audio formats. All companies are working towards improving their audio format technologies to minimize the storage space.

  But Heitaro Nakajima did not expect Apple to produce a new music player, which is beautifully designed.

  Also, the Apple brand is one of the big players in the electronics sector. Although they are not specialized in music players, they similar to Sony, where they have lots of loyal fans.

  What was more surprising is this Apple iPod’s internal storage is 5gb, much higher than Aiwa’s player. Even the LCD screen is bigger than Aiwa’s products.

  Heitaro Nakajima and Kameda Masao realized that hard disk MP3 players had developed very fast. The products they saw last year were bigger than their palm, but now, it is only half their palms’ size.

  Apple iPod is definitely considered a portable music player.

  The selling point of the iPod is the higher internal storage. Their new website, iTunes, had received the Recording Industry Association of America’s support, and their songs are priced lower than Aiwa’s.

  Heitaro Nakajima cursed those Americans. This is a form of protectionism! We are also a downloading website that offers licensed songs for downloads. But you all sued us, and now, you all go and support Apple’s website. Anyone can tell this is discriminating against us.

  The price of an MP3 song download on Aiwa’s English website is 0.99 USD. This price is slightly lower than an actual CD selling at around 20 USD.

  But Apple is offering 0.79 USD per download on their website. Are they not trying to make money? The average price of a download is less than 0.50 USD for their unlimited monthly download. They must pay the recording label more than 0.30 USD per download.

  Also, what about the cost of running the website? It is not a small amount.

  Aiwa’s website barely makes any profits, and how can Apple make any profits through this pricing? Can they accept the losses?! Impossible!

  The only explanation is those record labels had sold the copyrights to Apple at lower rates!

  “Hmph! We must sue those recording labels. How can they charge us higher rates?!” Heitaro Nakajima shouted angrily.

  Kameda Masao is also feeling frustrated but still persuaded Heitaro Nakajima. “Sue?! How are we going to sue? It’s their choice to sell the copyrights at this price, and no matter how much they sell, they are still making money. This is not against the law as long as they are not selling below their cost. When we signed a contract with them, we had not thought about this. Apple’s music format is just a form of MP3, but with a different name. We cannot use the law to restrict them.”


  When Aiwa signed the contract with those recording labels, one of the conditions is the recording label cannot sell their MP3 songs’ copyrights to other companies at lower prices.

  But Apple’s music format is not called MP3, and Aiwa cannot do anything to them!

  “Find out iPod’s weakness, and we will use this weakness as our main marketing campaign against them. I don’t believe that their product is as good as ours when they entered the music player industry. Even Sony’s products are not as good as us!” Heitaro Nakajima said.

  Apple had never produced any portable music players, and their expertise is not in this field. This is their first portable music player, and they can’t overtake Aiwa.

  For example, the background noise, battery life, internal storage, etc. will surely have a weakness.

  Aiwa’s branch office in the US quickly sent over the report on iPod. Heitaro Nakajima read it and was relieved.

  Although iPod’s internal storage is 5gb, the static noise is louder than Aiwa’s MP3 players. That means the audio quality is very lousy.

  Apple’s earphones’ technology is also not as good as Aiwa, and Aiwa can focus on their marketing’s music quality. During the Walkman era, Aiwa’s Walkman had won against Sony with its better sound quality for its customers.

  Apple’s iPod is using the hard disk as its internal storage and has a bigger screen. As such, the battery can only last 5 hours, while Aiwa’s MP3 player can last more than 8 hours.

  Aiwa is also developing the current internal battery technology, and a full charge battery can last more than 10 hours!

  Another important point to note is this iPod is not compatible with the Windows operating system. This means lots of PC users cannot use it. After all, there are more Windows users than iMac users.

  Aiwa’s engineers also found out that the iPod is missing a very popular feature among consumers, shuffle playback.

  Apple iPod can only play the songs according to the playlist, and many users will get bored very fast.

  After Feng Yu received the report, he called Heitaro Nakajima.

  “Boss, don’t worry. Aiwa will suppress the iPod, and our sales will surely exceed them.” Heitaro Nakajima said.

  Feng Yu laughed. “Actually, you all don’t need to worry about the iPod. Although the iPod has some advantages over us, these advantages are nothing compared to their weakness. Rest assured. We will just continue as planned. Their selling price is 100 USD more than us. This will limit its sales.”


  iPod’s retail price is set at 2299 USD, while Aiwa’s MP3 latest model is only selling 199 USD. But the pricing is not Aiwa’s biggest advantage. Aiwa’s biggest advantage is using the traditional MP3 format.

  Although Aiwa had provided a website to download original songs and encouraged their users to download from legal sources, many websites provided illegal downloads. These websites had cracked Aiwa’s technology protection measures on the MP3.

  Many consumers bought MP3 players is because they can download free MP3 songs. This is Aiwa’s biggest advantage.