The move, which was largely unexpected at this time, gives Sony a potent weapon by combining one of today's hottest digital technologies with a consumer device that has changed the way people listen to music since its introduction in 1979.
The electronics giant debuted the new personal stereo in Japan yesterday but reserved the major fanfare for an event in New York, where Sony celebrated the 20th anniversary of the Walkman.
The new Walkman, which features Sony's "Memory Stick" technology, was introduced alongside other new portable music models. Smaller than a piece of chewing gum, the Memory Stick is a storage medium competing with memory flash cards for dominance in electronic devices, such as PCs and digital cameras. It is expected to arrive in U.S. stores in January and retail for about $400.
Analysts believe that the new Walkman's design represents the direction most consumer electronics makers will take with devices that download digital music, at least in the near term.
"The small player-size and ruggedness that is enabled by solid-state media lends itself well to portable players," International Data Corporation analyst Kevin Hause said. Lightweight designs also make sense because most players must be hooked up to PCs for downloading and storing digital music, he said.
The next-generation Walkman furthers Sony's strategy of melding all its entertainment and electronics properties, from content to hardware. That philosophy has its roots in the company's purchase of Hollywood studios and record labels dating back to the mid-1980s.
For the budding digital music scene, the new Walkman marks an important endorsement coming from one of the best-known brands in the consumer electronics industry. At the same time, however, it could pose a major threat to rival products such as Diamond Multimedia's popular Rio player.
Although analysts expect the digital music player market to explode, it is still relatively small. PC Data reports only about 125,000 units sold this year, mostly by Diamond.
"It's hard to create a market all by yourself," PC Data analyst Stephen Baker said. "I'm sure, in one sense, Diamond doesn't want competition. But right now it's hard for consumers to find MP3 players, because there has been only one."
The portable digital music player market is expected to grow to 6.67 million units in 2003, up from 62,000 last year, according to figures from IDC. Those estimates, however, did not reflect the possible impact of Sony entering the digital music market.
Creative Labs recently introduced its first portable digital music player and other consumer electronics companies, such as Philips and RCA, plan similar devices.
"Certainly Sony coming in helps legitimize the market," Baker said. "Sony is also an electronic company and recognizes a good opportunity to get its name out there."
In addition, the well-known Walkman brand could be a big boost for the players, which until now has confused some consumers with technical terms like MP3.
Owners of Sony Vaio computers will be able to download digital music to their PCs and transfer it to the Memory Stick, which is loaded into the MP3 Walkman. Memory Stick is available with up 32MB storage capacity. Sony plans to introduce the storage medium to more than 30 consumer electronic devices during the coming months.
Sony had initially hoped to sell the new Walkman during the holiday season, but a sales representative for a national electronics chain said today that he doubted that the device could be shipped to retailers that soon.
Sony delayed moving into the digital music market because of the copyright debate surrounding MP3-encoded music. IBM and Sony had been developing a pirate-proof means of distributing music over the Internet.
Sony would not comment on speculation it would introduce the pirate-free format with the new Walkman.