Touting brand and pursuing differentiation is in vogue with nearly every original equipment manufacturer now chasing Nokia Corp. and Motorola Inc. over the rainbow, looking for the proverbial pot of gold.
LG Electronics Co. Ltd. is no exception and its newly released Fusic phone is an attempt to hit the market’s sweet spot of mid-tier, music-enabled devices aimed at the tech-savvy youth market that wants to carry tunes on-the-go.
The Fusic-touted by LG and its exclusive carrier patron, Sprint Nextel Corp., as a name fusing “fun” and “music”-is a co-branded, clamshell-style handset priced at $180 at Sprint Nextel (“retail” is said to be $330, less an “instant savings” of $150 with a two-year contract), that can download MP3 tracks from the Sprint Music Store and carries Sprint Nextel’s Power Vision video service. The device offers a 1.3 megapixel camera, Bluetooth connectivity and an FM transmitter for sending users’ music to their car radio. Music controls have been placed on the outside of the closed handset and calls automatically ring through the music function. The handset offers only limited memory and comes with a 64 megabyte microSD card.
So what does the Fusic device, feature set, price and deal with Sprint Nextel say about LG’s strategy in the United States and its ability to win converts in the music-phone space?
According to LG Director of Marketing Jon Maron, the Fusic is an early result of the company’s research-and-development facility in San Diego and is aimed only at the U.S. market’s music-centric consumer in the 17-to-34-year-old age group.
“It’s definitely right at the top [of LG’s U.S. music phone portfolio] in terms of positioning,” Maron said. “It’s not just another clamshell phone.”
On the LG and Sprint Nextel relationship, Maron said, “We build product-specific platforms for our carriers; we don’t build one platform, throw it to all the carriers and see who wants it. With the Fusic, at very early stages of development, we went to Sprint and said, `Here’s what we’re thinking, what do you want it to do as far as your Power Vision service is concerned, your software, your network, to build your subscriber base? They helped us build the product to their specifications. We take every opportunity to build products that will help drive their business.”
Avi Greengart, senior analyst with Current Analysis, said that the Fusic has some things going for it, but cautioned that the sweet spot for mid-tier music phones is being targeted by every handset vendor and that LG’s close pursuit of South Korean rival Samsung Electronics Co. Ltd. leaves it open to bigger currents in the handset business.
“The Fusic is a premium product and prospective customers must be interested in Sprint’s content and this model in particular to choose it over, say, the Samsung a900, which is less expensive,” Greengart said.
The Fusic’s FM transmitter is a unique feature for a music phone, but the 64 MB microSD card that is included with the device doesn’t provide much memory-though owners could always purchase larger capacity cards. Sony Ericsson Communications L.P.’s Walkman series of music phones, for example, sport 512 MB of music storage at a competitive price.
The Fusic is stylish with is faux mother-of-pearl skin, but not particularly thin-a style issue where, despite its not being a music phone, the Motorola Razr cuts across product lines with its new sub-$100 price availability.
LG’s strategy of shadowing its larger competitor Samsung “is less appealing, now that Samsung has seen significant competition from Motorola and Nokia,” Greengart said. Copying form factors and cutting prices worked well for Samsung and LG “as long as Nokia and Motorola were sleeping,” Greengart said. “But Motorola is back with a vengeance and Nokia is offering its N91 music-enabled handset in the U.S. with a 4 [gigabyte] hard drive. And in the U.S., Motorola is back with a vengeance, especially with the Razr coming down to $70. You can out-feature your competitors, but that’s not as effective in the U.S., which is a price-driven market.”
Therefore, in Greengart’s view, LG’s Fusic may have a tough time at $180 with low memory, despite its unique features. Greengart echoes this view with regard to the Fusic’s price competitor, the Samsung a900, priced at $150.
On the positive side, LG’s branding effort is “doing spectacularly well,” in part due to advertising for hot consumer electronics items such as plasma television, as well as to the big-volume success of its VX6000 series silver clamshell handsets, the analyst said.
On the music-phone market in general, Greengart is bullish. “It’s early and it should be huge,” noting that Apple Computer Inc.’s iconic, portable music device, the iPod, has sold “only” 70 million units worldwide.
As memory and battery life increase and costs drop, the market will grow, Greengart added.
