Portable MP3 Player Announced

Diamond Multimedia Systems, Inc., (Nasdaq: DIMD), a leader in interactive multimedia and PC entertainment, today unveiled the Rio PMP300, a portable music player that stores and plays-back up to sixty minutes of digital quality music for under $200.

Based on the most popular Internet music format, MP3 compression, and flash memory technology, Diamond's Rio PMP300 portable music player is like a Walkman or MiniDisk player, only much lighter and smaller. Rio also has no moving parts, which means no skipping, even when subjected to heavy vibration and movement such as during extreme sports activities. Additionally, the Rio PMP300 includes Jukebox MP3 software licensed from MusicMatch Corporation and Xing Technology Corporation, allowing users to convert CD tracks from their personal music collection into MP3 format using their PC. Users can then create a customized mix of music that can be played back on the Rio PMP300 or on their PC. Rio is expected to ship to online music resellers and select retailers in October for an estimated retail price (ERP) of $199.95. Customers can also pre-order the Rio PMP300, starting today, through Diamond Multimedia's online store (diamondmm.com/rio), www.mp3.com, www.goodnoise.com, and www.musicmatch.com.

"With the proliferation of downloadable music on the Internet and Diamond's expertise in PC entertainment devices, the Rio portable music player was a natural progression in the company's line of award-winning PC peripherals," said David Watkins, vice president and general manager of Diamond's Multimedia Division. "The biggest obstacle to mainstream adoption of digital music and audio has been the lack of portability and Rio solves that issue."

"Diamond is committed to becoming the brand-of-choice among PC users who are looking to purchase high-quality portable audio solutions for the enjoyment of digital music and Internet audio content," said Ken Wirt, vice president of corporate marketing at Diamond Multimedia.

Unique Design Offers Upgradeability and Ease-of-Use

Diamond's new Rio PMP300 features a compact size of only 3 1/2" x 2 1/2" x 5/8" and weighs in at only 2.4 ounces, making it a truly portable device. Additionally, Rio runs off a single 1.5V AA alkaline battery for 12 hours of continuos playback. The device includes 32MB of onboard flash memory for up to 60 minutes of digital-quality music playback and up to 16 hours of voice-quality audio playback, allowing users to download voice-based audio content in MP3 format such as books, news broadcasts and more. Removable, add-on Rio flash memory storage cards in both half-hour and one-hour configurations give users the flexibility to easily add storage capacity and unique music mixes (exercise tracks, work tracks, etc.) to their Rio portable music player. Rio Flash memory upgrades are available direct from Diamond Multimedia's online store for an ERP of $49.95 (1/2 hour) and $99.95 (1 hour).

The Rio PMP300 portable music player will ship with headphones, a 15-pin cable, a parallel port adapter, a 1.5V AA battery, MusicMatch and Xing Technology's JukeBox MP3 Software for CD conversion and archiving, and CDs from MP3.com and GoodNoise containing over 100 free MP3 songs.

Users simply download digital music and audio content from the Web using a PC modem, or from a music CD loaded into their PC's CD-ROM drive. The Jukebox software automatically compresses audio files up to one-twelfth their original size, while maintaining digital sound quality. The software's easy drag-and-drop interface enables users to customize playlists as well as archive and organize music files. With an included parallel port connector, MP3 audio files are easily transferred to Rio and are ready for listening enjoyment. Hardware that features high-quality sound effect options such as Jazz, Classic and Rock, and a diverse playback mode with Repeat One, Random, Repeat A-B, Repeat All and Intro modes, gives users the versatility and advanced functionality expected in high-quality audio devices.

MP3 Continues to Gain Popularity

By today's estimates, MP3 is the most popular audio format on the Internet, due largely to its standard, non-proprietary compression algorithms and exceptional sound quality. MP3.com, the largest Internet site for licensed MP3 content, projects the user base to be over three million and growing rapidly. "One of the factors that will contribute significantly to this growth is new hardware products such as Rio that are only now beginning to surface. Users want to be able to take music away from their computers and play it wherever they go," said Michael Robertson, president of Z Company, which includes the MP3.com website.

According to Jupiter Communications' "Music Industry and the Internet" report published in July 1998, online sales in the U.S. for pre-recorded music will climb to more than $1.4 billion by the year 2002, compared to only $88 million in 1998. "This significant jump presents an enormous opportunity for portable music players like Diamond's Rio," said Ken Comstock, general manager of the audio business unit at Diamond Multimedia. "MP3 has been the technology of choice for people who access and playback music from the Internet. Further evidence of MP3's popularity can be found just by following what people search for on the Internet. According to Searchterms.com, who publish the most common search queries on a monthly basis, MP3 was the second most frequently entered term."

Strong Industry Support and Partnerships

Diamond Multimedia has garnered strong support from MP3 proponents and announced today strategic partnerships with MusicMatch and Xing Technology Corporation to provide encoding and CD to MP3 conversion technology, as well as MP3.com and GoodNoise to provide licensed MP3 content for use with Diamond Multimedia's Rio PMP300 portable music player. (See separate press releases dated today.)

"Until now, Internet music has been primarily a PC experience," said Gene Hoffman, Jr., president and CEO of GoodNoise Corporation. "Diamond's introduction of the Rio portable music player and GoodNoise's relationships with artists and record labels will result in an end-user experience that reaches far beyond the PC and the Internet."