The day Rio's music died

Parent company of iPod rival says portable digital-audio market is too competitive to warrant new investment.

The Japanese company that makes the Rio line of MP3 players is shuttering its portable digital-audio division.

Rio parent D&M Holdings said on Friday that the ultra-competitive business no longer fit its market strategy.

Although it has only a small market share compared to Apple Computer's iPod, the Rio brand name has been linked with the early days of digital-music history since weathering a lawsuit from the recording industry that aimed to shut down the MP3 hardware business.

D&M Holdings--which also owns high-end home audio brands including Denon and Marantz, and is close to acquiring Boston Acoustics--said the portable MP3 player business required too much investment, and didn't offer enough return, to warrant continuing.

The company said it will stop producing the Rio line of products at the end of September.

Despite its history of innovative designs, the Rio brand has had a choppy corporate history.

Originally produced by Diamond Multimedia, the first Rio-branded MP3 player triggered a lawsuit in 1998 from the Recording Industry Association of America, which at the time viewed MP3 as primarily a format for music pirates.

After an initial injunction blocking sales of the product , courts ultimately ruled against the record industry , clearing the way for a digital-audio market that evolved into today's iPod-dominated music culture.

Diamond Multimedia was purchased not long afterward by Taiwanese graphics chip company S3, which eventually sold its chip business and morphed into Sonicblue , acquiring other consumer technologies, including ReplayTV, along the way.

The company's fortunes fell in the middle of the dot-com crash, and Sonicblue declared bankruptcy in early 2003, selling off the Rio assets to D&M Holdings.

The last several years have seen several well-reviewed designs from the company, including the hard-drive-based Rio Karma and Rio Carbon players, which respectively competed with the iPod and iPod mini.

Neither device, however, was able to gain more than a small fraction of the iPod's market share. Some customers complained about persistent hard-drive problems with the Karma.

D&M said it would retain rights to the Rio brand and trademark, and would continue to support retailers and customer service claims.

 

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