Digital Music: Will Microsoft Eat Apple's Lunch Again?

Dec 24, 2004 (07:12 AM EST)

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There's a fight brewing between Microsoft and Apple over the future of digital music that reminds me of the long-ago battle between Macintosh and Windows. Apple got its clock cleaned then and it looks hellbent on making the same mistake now.

The fight will start in earnest with the imminent launch of the Napster-To-Go service. For fifteen bucks a month, subscribers (and I'll be one of them) will be able to download as many thousands of tracks as your player has room for. For that same amount, you can buy 15 tracks from iTunes.

Microsoft is behind the scenes pulling the strings with its new digital rights management scheme, which it calls PlayForSure. That scheme allows the music services and record companies to control how the songs are used. Apple, for its part, remains publicly certain that its buck-a-tune approach is the way to go.

Besides being an obviously powerful value for consumers, there are at least two more reasons why Microsoft's PlayForSure could eat Apple's lunch. The last time these two vendors fought it out, it was Bill Gates and Steve Jobs, mano y mano. Gates and the still-emerging Microsoft won handily against a then-strong Apple. Now, Microsoft is much stronger and has as allies every music service and player manufacturer that competes with iPod and iTunes.

Second, iPod isn't as clearly superior to its competition as the Macintosh was. For instance, I just bought a Creative Zen Touch, which provides excellent sound quality, a reasonably tiny form factor and costs significantly less than the equivalent 20 GB iPod. If iPod was clearly superior, it would engender more loyalty to the iTunes approach. It isn't.

As was the case with Macintosh, Apple seems to be arrogantly holding its ground against Microsoft. But despite the current dominance of iTunes and iPod, it's hard to figure out how Apple can emerge from this fight with any dignity -- or market share -- left unless it swallows its pride and wakes up.