[This entry has been revised: I didn't read the MediaNet release carefully enough...they are offering DRM-less MP3s, not WMA files. Apologies to anybody whom I misled. My bad.]
Back in May, EMI--one of the big four record labels--agreed to sell its songs through Apple's iTunes without digital rights management (DRM) protection.
Before this move, iTunes and the iPod were technically linked: if you bought a song from iTunes, you could only play it on an iPod (unless you burned it to CD then re-ripped it into an unprotected format). Offering DRM-less downloads severed this link, allowing users to play downloaded iTunes songs directly on a Zune player (one of the few portable players other than the iPod to support AAC), and making the MP3 conversion process easier. But by and large, the landscape didn't change much. The iPod already has 70 percent+ of the market, so there just isn't much demand for playing iTunes songs on other types of devices.
Today, MediaNet announced that it, too, has licensed more than 1 million DRM-free tracks from EMI. MediaNet, which just changed its name from MusicNet, is the back-end store for most of the second-tier music download stores (iTunes is the only tier-one store, with something like 80 percent market share), including Yahoo Music, MTV Urge (heavily promoted by Microsoft before it launched its own Zune player and store), and Samsung Digital Connect (Samsung's response to Zune).
Equally important, the DRM-less downloads on the MediaNet stores will be in the MP3 format. While AAC (and Windows Media Audio, for that matter) offers a much better quality-to-compression ratio, MP3 is supported by all portable players, all digital media software for all computer platforms, and far more consumer electronics devices than any other compressed digital format. This could actually change the landscape: paid downloads, from one of the major labels, playable on an iPod, from a source other than iTunes. That's new.
The challenge to iTunes' hegemony could accelerate when Amazon launches its MP3-based store later this year. If EMI and the other smaller labels offering DRM-less MP3s begin to see their digital sales rise, then the other big labels might follow suit. And once all tracks are available in DRM-less MP3 format, the only differentiator for the iTunes store is the fact that it's integrated with the iTunes software, which is required to use an iPod (or iPhone). That integration should be enough to keep iTunes in the lead, but now these other stores have a fighting chance to compete on pricing and selection.
When Microsoft released its Zune player-store-software combination, it effectively drove a stake into the heart of PlaysForSure, the company's logo program that identifies Windows Media-based online stores and the players that work with those stores. Sure, Microsoft still claims that it's equally committed to both initiatives, but PlaysForSure partners have a right to be concerned that their technology partner is competing directly against them.
Samsung was one of Microsoft's most steadfast digital media partners: it released one of the earliest Portable Media Centers (portable audio-video devices based on Windows Mobile software, which beat the video iPod to market by a year) and was one of the charter PlaysForSure partners. But the company also was one of the first to see the writing on the wall: in September, right after the Zune rumors began, Samsung announced plans to contract with MusicNet, a back-end provider of music stores, to provide a subscription-based online store in Europe. (Yes, this is the same MusicNet that was originally founded by a couple of the big record labels and provided expensive and heavily restricted downloads to end users, but its ownership and business model have changed.) The store is integrated with the new Samsung Media Studio software that ships with Samsung portable players. In other words, Samsung is following in Microsoft's footsteps--and of course, both are following Apple--and releasing an integrated set of devices, stores and PC client software.
Apparently, the store launched today in the U.K., France and Germany. This probably won't affect too many people--April 2007 NPD stats listed Samsung as the No. 5 music player manufacturer, behind Apple, SanDisk, Creative Technology and Microsoft. Nonetheless, the creation of new music stores could be good for the record companies, who are seeking any leverage they can get against Apple.
Speaking of, Universal Music apparently confirmed to MacWorld that it has signed an "at-will" contract with iTunes. This means it could offer some of its artists' songs to other music stores as exclusives, or it could pull songs from iTunes if Apple refuses to budge on its univeral pricing policy of $0.99 per song.
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