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Creative cranks up MP3 player

The company's Nomad device will hold about an hour of music, more than that of Diamond's market-leading Rio player.

Creative Labs officially entered the market for digital portable music players even as music industry giant Sony lurks in the wings with plans for its own "digital Walkman" and Diamond Multimedia upgrades its existing device with a flashy case and higher recording capacity.

Creative Labs debuted its first MP3 player at the Spring Internet World trade show today, as previously reported, heating up competition in a market currently dominated by Diamond Multimedia's Rio player.

Creative Labs' device, dubbed the Nomad, will hold about an hour of near-CD quality music, while a version with extra memory can hold almost two hours of music, which is twice what Diamond's entry-level player can store. The Nomad, unlike the Rio, can also record voice memos and show the title of songs on a small LCD display. The company also unveiled a special Web site called NomadWorld that offers downloadable music and product information.

A Nomad player with 32MB of memory is being priced at $169, while the 64MB version will be priced at $249, and is expected to be available later this quarter.

Users can download a growing supply of both legitimate and pirated music titles in the MP3 (MPEG 1, Audio Layer 3) audio compression format, which allows users to download music tracks and save them onto a PC hard drive or an expanding array of newfangled portable MP3 players.

For Creative, the move is an effort to capitalize on the mushrooming interest in MP3 as intense competition in the market for graphics and sound subsystems guts the company's profits.

How hot is the market for MP3 players? Diamond said recently it has already shipped more than 100,000 units since the Rio's launch late last year, despite a messy legal battle with the recording industry, which was seeking an injunction against Rio's distribution until better safeguards against piracy were in place.

And Diamond isn't sitting still while Creative launches its product--the company is now offering a translucent teal version of the Rio player with 64MB of memory for $249. The device is currently only available directly from Diamond.

But the Nomad alone isn't likely to save Creative, analysts say, and consumer electronics industry giant Sony is looming as the 800-pound gorilla in the nascent market for portable digital music players.

Sony has talked of plans to bring out its own take on the "digital Walkman" market, reportedly within the year. The device would use Sony's own Memory Stick technology for added storage capacity instead of the industry standard Compact Flash memory storage technology, in part due to Sony's concerns over music piracy.

Analysts say the incentives for jumping in outweigh any negatives.

"There's no question that it makes sense for Creative and Diamond to get out in front of the market even without music industry's endorsement. If MP3 does continue to be the predominant standard, they'll have cashed in early on what will be a massive market," said Lucas Graves, analyst with Jupiter Communications