Iomega hopes MP3 player and storage device will make music

By MICHAEL FOREMAN

External disk-drive maker Iomega aims to become a force in the burgeoning digital music market with HipZip, an MP3 player that doubles as a storage device.

The HipZip uses Iomega's 40Mb PocketZip removable disks as its storage medium, so it can also store other data.

"Forget about it playing MP3 files - it can also hold your Powerpoint presentations and spreadsheets," says Peter Dawson, Iomega director for Australia and New Zealand.

"The MP3s are a bonus."

Iomega says each 40Mb PocketZip (formerly sold under the brand Clik!) disk stores about 40 minutes of music as MP3 files or 80 minutes in Windows Media format.

Two disks come with the player, which sells for $949 including GST, and extra disks cost about $29 in quantities of 10.

Mr Dawson says this compares favourably with the $200-$300 cost of each 48Mb Compact Flash card or Sony Memory Stick as used by other MP3 players.

He is confident Iomega will sell 1000 HipZips in Australia and New Zealand before Christmas - if it can get them here early enough.

"In the US we are selling them faster than we can build them; there's a big backlog of orders."

But sales next year are harder to predict.

"It's a tough call. All the forecasts for MP3 players are huge, but no one knows how they are going to ramp.

"Our estimate is that we will sell 15,000 to 20,000 units next year, and that's conservative. It wouldn't be worth doing if it was less than that, and it's still nowhere the magnitude of our other drives."

Mr Dawson says Iomega has sold 37 million Zip, Jaz and PocketZip removable drives worldwide, Australasia accounting for 6 per cent of sales with 250,000 drives a year.

Sales in New Zealand through distributors Tech Pacific and Ingram Micro represent about 13 per cent of the Australasian total.

He concedes that Iomega disks suffer from a reputation for sudden failures known as the "click of death," but denies that the disks contain a hidden expiry date.

"There is a whole conspiracy theory that says we somehow built something in."

Mr Dawson says failures usually occur when the disk has been crushed, bent or subjected to a magnetic field.

This happens with floppy disks all the time, but with a floppy you would just pull it out and throw it in the bin.

Mr Dawson says failure rates for Iomega's drives as shipped are only 0.02 to 0.03 per cent, but a problem with external drives is that people are prone to knocking them off tables, causing the head to crash.

"The click of death will always be with us, but so will it with any kind of spinning disk."

While the HipZip is a departure from Iomega's existing range, Mr Dawson believes it will appeal to the company's traditional customer base.

"At the moment anybody who is interested in getting a MP3 player is also likely to be into computers and the net.

"If they are on the net they are going to be downloading a lot of data and that is going to become an issue, and these days a floppy just doesn't do it."

HipZip will play unprotected MP3 files obtained from such sources as Napster, but Iomega has exploited a feature in the disk storage medium to provide copy protection. Each disk includes a unique electronic serial number that can be used as an encryption key to ensure a file can only be played from the disk it was first copied to.

Mr Dawson says PocketZip disks are compatible with Adobe's WebBuy and PDF Merchant software, which can be used by anyone to set up an e-commerce site to sell content.

"This gives the little guys access to secure content e-commerce.

"We are talking about things like talking books here - anyone with something to sell can do it now."