Will Disney's Kids MP3 Player Threaten Apple? (DIS, AAPL, SNDK, LEXR)

On Thursday, Disney introduced its 'Mix Stick', a 128MB MP3 player with expandable memory designed to appeal to the 6-12 year-old market. Priced at $49.99, it comes in at about half the cost of the cheapest iPod -- the 512MB Shuffle (also popular with kids).

Three quick points and stock implications:

1. Disney has chosen a proprietary storage format for the player. Kids will be able to buy pre-recorded music on insertable memory. It's not clear whether that strategy will succeed: the other music companies may refuse to adopt it, there may be too little content available on the format, and consumers may be resistant to yet another storage format.
2. If the Mix Stick succeeds in grabbing market share, Apple (ticker: AAPL) may be forced to slash prices on its low-end player or design a kids' iPod of its own. And there's reason to think that Disney may succeed. Other MP3 vendors have failed to break Apple's grip on the market because they are technology companies that lack Apple's design flare and understanding of usability and the user experience. But Disney is not a technology company, but is arguably the pre-eminent global marketer to kids.
3. The clear winners from lower prices, better productization and more efficient marketing of MP3 players to a relatively untapped market are the flash memory vendors such as Samsung, Lexar (ticker: LEXR) and Sandisk (ticker: SNDK).

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