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Slacker Portable: Debut set for December

slacker playerSlacker’s a relatively old word.  It’s been around since at least the 1890’s and had a variety of meanings, most negative in tone.  San Diego based Slacker, a technology company of the same name, is focused on music distribution and hoping to give the word new life and new meaning; something traversing from lazy and laissez faire to easy to use and can’t live without.  Their biggest test is almost here. 

Though recent fanfare and marketing has been limited, on December 13, barely in time for the holidays, Slacker will ship their portable music player. 

The device is modern and slick in appearance.  With a four inch diagonal screen, on-board WiFi and a ten hour battery life, it might be mistaken as another iPod competitor.  It’s not, at least directly.  Slacker’s aiming for something altogether different.   Instead of targeting Apple head on, they’re competing for the same purchasing dollars but going after the radio market, trying to be Radio 2.0. 

The brainchild of three former music company executives, Slacker, the company, launched commercially last March with high hopes for changing music distribution.   Their concept was built around integrating three music delivery channels into a single interconnected product line.

Component one, which was available at launch, is a personalized Internet radio station platform similar to Pandora or  Like both, Slacker streams music over the net and attempts to personalize the experience by learning from your listening habits and adjusting the music accordingly.  If you listen to G Love and Special Sauce, for example, it might refer you to Jack Johnson.   If it’s the Rolling Stones, you might get a little Led Zeppelin. 

The Slacker catalog is divided into 100 categories that they call “Stations.”  Unlike traditional radio, the listener can customize these, or build their own, effectively becoming the DJ.  Gone are the days of the same song list recycling over the airwaves.  Music won’t loop until you can’t shake a song from your head.

The second component  of Slacker’s offering, also available since last spring, is a desktop music management application that integrates Slacker’s streaming radio service with your own existing music files; it’s something of an iTunes-meet-Radio hybrid (minus the direct sale of single songs).

The final piece in Slacker’s plan is the portable player due in December.  Available in 2, 4 and 8GB models, the slick looking devices can be pre-ordered for $199 to $299.  They’ll ship December 13.

Whether you use the portable player, or your web browser, the basic Slacker service is free but ad supported.  They stream their music at no charge so long as ads are also displayed on the screen. (Graphic ads will display on the screen of the portable device just as they would through your browser if online.).

For those looking for more customization and no ads, a premium version is available ad-free for $7.50 a month.

As previously noted in a Metue profile last June, the Slacker value proposition isn’t a bad one.  Their model is built on the theory that more people listen to the radio than buy music.  It also intelligently recognizes that past subscription services like Rhapsody or Yahoo Music were flawed, in part, because they required constant commitment. With those services in the past, once you stopped paying, you lost all your music. 

Slacker’s different.  With them, music plays whether you choose to pay or not.  You can listen purely online, no cost at all.  If you want  the player, you pay for it, but the ad-supported option insures you’re never without music.   The device also supports MP3 and WMA audio files you may already own.  (Fairplay encrypted songs bought on iTunes, as with all non-iPod players, are not supported)

A WiFi connection, or a promised satellite component (not available yet), allow you to get updates on the run; no need to be tethered to home.  Hit a WiFi hotspot and the player will download a new selection of songs to update your “station.”  Customers also won’t need the music management application if they don’t want it.  The player can connect to a computer and redirect to their website for music updates via a simple utility.

Slacker is all about ease of use and simple music discovery.  For that reason,  there are no playlist requirements, no tedious time-consuming conversions of CD’s to MP3s in order to enjoy it.  It’s a device that instantly allows access to a digital music stream.  True to same goal, any of the three components, the streaming radio, the management application, or the portable player, can be used independently without each other. 

“It’s entertainment at the push of a button.”  VP of Marketing Jonathan Sasse told Information Week.

More than a million people seem to agree.  One million is the rough estimate registered users for the service (as of October). The test will be to see how many of those expand from online convenience to buying the portable player too (and how many new buyers are drawn in too).

A bigger test will be to see if Slacker (both online and as the player) can expand to compete with other products in the market.  Certainly, convenience and ease of use are things consumers do pay for, but faced with a choice will they prioritize it above all? Would I, for example, allocate money for a Slacker player over an iPod?  Or what about a Zune?  The new Microsoft player is equipped with an FM radio receiver and WiFi access.  It  also plays video (Slacker hopes to add video service in the future but doesn’t support it today).  Feature for feature, it’s video vs personalized Internet radio.

Unequivocally, the Slacker player is visually impressive. Far more than Amazon’s recently launched Kindle, it looks polished. The interface too looks intelligent. First glance, there’s almost a hint of Apple’s design magic in it. The question is: in the calculus of today’s consumer is video more valuable than personalization?

It’s tough to guess the answer to that question. Though it seems more likely that Slacker is destined for a niche domain than mass market adoption, there’s plenty of potential for something bigger. And even as a niche segment of the market, there’s still lucrative spoils to be had.

A twenty percent sell through to existing subscribers would translate to nearly $50m in hardware related gross revenue on the sale of 200k units.  That should be achievable within three quarters or less.  It’s also in the ballpark of first generation iPods sales. (In 2 quarters between October 2001 and March 2002 Apple sold about 182k iPods)

If Slacker can attract new users on top of that they might pass into 250k to 300k units.  That will pale dramatically next to Apple’s shipment of 10.2m iPods in the recent quarter and likely also pale next to Microsoft’s recently introduced Zune 80 (Microsoft isn’t releasing unit sale numbers) but it’s not a bad. 

Between subscription and hardware sales, the potential is there for Slacker to gross well upwards of $100m in revenue.  That’s high enough that VC’s were willing to gamble.  It is also enough that the record labels took a gamble too.  (All 4 of the “Big 4” Music Labels (EMI, Sony, Warner and Universal) have been signed as partners since September).   Within a few weeks, all will begin to find out if consumers will experiment too.  A million online subscribers is good but a million pieces of hardware in the market is a lot better.

The portable player is being manufactured in Taiwan by Inventec, a contract manufacturer also involved in iPod manufacturing.   Slacking is taking pre-orders now.


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