Apple Stokes a Digital Music Standards War

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Opening iTunes to New Players

AAC-format supporters include some notable names, including Microsoft's Zune. So come May, the 16 people who own one will be able to buy EMI tracks from iTunes and presumably play them on that device. Sony's (SNE) PlayStation Portable also supports the format, as do a few of its Walkman-branded MP3 players. I can find one player each from SanDisk (SNDK), Creative Technology (CREAF), and Sharp (SHCAY) that include AAC support. Palm (PALM) and Research In Motion (RIMM) both support AAC via software that runs on the Treo and BlackBerry Pearl smartphones. IPod sales, which are crucial to Apple's bottom line are unlikely to get much competition from these devices, as none are as good at the stripped-down interface, and none can touch the iPod's inherent status factor.

Having stripped the iPod-only restrictions, at least from the EMI catalog, on iTunes means there is even less shackling an iTunes customer to the iPod than before, which may help Apple fight off the antitrust complaints of European regulators.

But the real target is Microsoft. What we now have is a good old-fashioned standards war heating up, and it is pitting the old foes Apple and Microsoft against each other once again. Saying Apple has the upper hand is giving Microsoft more credit than it deserves.

Spurned Plays for Sure Partners

All of those companies that have been "partners" of Microsoft—Samsung, Creative, Archos, and SanDisk, to name a few—have been treated pretty poorly by Redmond recently. Before the Zune, Microsoft had a branding program called "PlaysForSure" that was intended to indicate wide-ranging compatibility. Buy a song on Napster, or Yahoo, or MTV Networks' (VIA) URGE, or any one of a score of other online music stores, and they were guaranteed to play on devices with the PlaysForSure brand. (Some people had another phrase for it, which I won't reproduce here, but the third word rhymed with "bit.")

Those partners were all left holding the bag as Microsoft walked away from PlaysForSure, when it launched the Zune and the companion Zune Marketplace. Now these same members of Microsoft's gang, at least those lucky enough to have players on the market that support AAC, will be only too proud to brag on their packaging that they are, at least in some limited way, compatible with iTunes.

In turn this will make Microsoft's WMA format—and all its expensive licensing terms—a lot less attractive. The next generation of non-Apple MP3 players heading to market will be notable for two things: AAC support, and maybe, just maybe, a lack of WMA support.

Finally, Compatibility

Online music stores, like Napster, Yahoo Music, URGE, and all the others that sell WMA songs will be forced to consider jumping into the DRM-free AAC camp, and thus become "iPod compatible," and in so doing become competitors of iTunes. Apple will no doubt be fine with the longer list of online music rivals, because in its range of priorities, anything that sells more iPods can only be a good thing. With time, practically all music stores will be selling iPod-compatible songs. This will be considered a Richter 10 event at Microsoft.

If more labels follow EMI's lead, and the other online music stores of the world are offered the same conditions on DRM-free music as Apple, Microsoft will have completely failed to corner the digital-music market, and by this time next year, there will be talk of it pulling the plug on its WMA-based efforts entirely. Or it will be forced by market forces to follow Apple's lead entirely rather than, as it has with the Zune and Zune Marketplace, copy it poorly. Think of it: Microsoft labeling its second Zune player as "compatible with iTunes."

All of this will of course, be lost on my annoying relative. But then, just as some people deserve Windows, they also deserve to remain oblivious.

Hesseldahl is a senior writer for BusinessWeek.com and his Byte of the Apple column, covering all things Apple, appears biweekly at www.businessweek.com/technology.