SonicBlue to Fade Away.

By Richard Menta 3/22/03

SonicBlue evolved from the Diamond corporation who, with a little player called the Diamond Rio, created the MP3 portable player market. It wasn't the first MP3 player - that recognition goes to Eiger Labs' MPMan - but it was the first to find mass sales of this new variety of audio product. It was this success going into the 1998 Christmas season that spurred a couple of guys in December of that year to start a little publication known as MP3 Newswire.

Throughout most of its run, the Rio was the top selling digital music player. It was just a little over a year ago the Rio made our Winners of 2001 list as we wrote this:

The Nomad Zen can be ordered from Amazon.

Despite all the large electronic manufacturers entering the MP3 market in full force, SonicBlue's Rio line has managed to remain the dominant player in the digital music portable arena. That's no easy trick, even if they did create this market. If they can continue to hold onto their significant market share, look for one of the electronic giants like Matsushita or Toshiba to make a bid for the company.

The last sentence above looks like it will come true, though certainly not under the good terms SonicBlue would have liked to have recieved. Truth is, we have already penciled in SonicBlue for a spot on the losers of 2003 list.

Times have changed. The success of the Rio and SonicBlue's ReplayTV line were tempered by a company fighting fiscal difficulty and repeated lawsuits from an entertainment industry. Competition in the market has become crowded with most of the electronic giants offering a digital music player. Even Apple jumped into the fray with the iPod, a unit that alone grabbed 15% of the total market. In the end, SonicBlue decided to capitulate to the realities of the market it helped build and declare bankruptcy.

It's not a bankruptcy for survival either, but one that will allow the company to liquidate under the most favorable terms for investors. The company plans to sell off its main and still valuable subsidiaries by April.

They already have letters of intent from two buyers. Opta Systems has agreed to by the company's GoVideo business for $12.5 million (a business that came their way from SonicBlue's acquisition of Sensory Science, an early and excellent manufacturer of MP3 portables). The Rio and ReplayTV lines will go for $40 million, sold to D&M Holdings Inc, the holding company for Japanese electronic manufacturers Marantz and Denon.

"We have great confidence in our business units, and worked to develop a plan that would permit SONICblue to continue operating within the significant constraints imposed by our debt and legacy liabilities," said SONICblue CEO Gregory Ballard on the company's website. "In the end, we and our financial advisors have concluded that the best outcome for our creditors and our employees is to sell our businesses to better heeled owners."

The good new is that the Rio and ReplayTV lines will live, though possibly badged as Marantz and Denon products. The company insured on its site that ReplayTV won't be affected by the sale.

Dear ReplayTV customers,

This morning, we announced the proposed sale of ReplayTV. Rest assured that the ReplayTV service you have come to love will not be affected or interrupted in any way as a result of this process. In fact, we plan to continue to innovate, and believe that the ReplayTV service will only improve through this transition. So relax, enjoy ReplayTV, and rest assured that it will be business as usual. We are very excited about our future, and we appreciate your continued support and business during this brief transition.

Thank you, The ReplayTV Team

Prior to the bankruptcy SonicBlue was fighting a TV industry lawsuit over the ability of ReplayTV to cut out the commercials when recording programs on TV. The company recently settled with Tivo over an expensive patent fight. The company was looking for a straight out buyer, but never found it. in the end it has to break apart and sell its assets by the piece.

End of an era? Not so much as a victim an industry battling to grow up - with growing pains no teenager would ever envy.


The 20GB Rio Riot Jukebox can be ordered from Amazon


Other MP3 stories:
Apple Paid Digital Music Service - Can it Overcome Record Industry Resistance?
Mix cd swapping is goooooooooooood!

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