Digital music services try to nibble away at Apple

By Antony Bruno

DENVER (Billboard) - The digital music wars are entering a new phase.

Several digital music service providers -- including MTV's Urge, Rhapsody, Verizon Wireless, Wal-Mart and Yahoo Music -- have unveiled new forays designed to shine light on their struggling services in the shadow of Apple's still-dominant iTunes.

While no individual effort is likely to dislodge Apple from its No. 1 position, all are clearly efforts to chip away at its commanding lead. According to data from NPD Group, Apple controls 73.7 percent of the retail digital-music market, with more than 3 billion tracks sold since it went live. iTunes is also the third-largest music retailer of any kind, surpassed only by Best Buy and Wal-Mart.

REALNETWORKS, MTV, VERIZON WIRELESS

In perhaps the most significant move, the three providers have joined forces to offer one integrated digital-music platform that includes Rhapsody's technology and music, editorial content and playlist programming from MTV's Urge and wireless distribution via Verizon Wireless. MTV brings strong marketing muscle -- to the tune of $230 million during the next five years, not to mention its on-air channels -- plus well-received blogs and other resources that should improve on Rhapsody's content. Verizon brings a mobile extension, something market leader iTunes still lacks. And Rhapsody brings the most popular subscription services on the market, its existing subscribers and back-end mobile technology.

The big bet, however, is on integration. Verizon will replace its Web-based digital music store with the new Rhapsody service and will send a copy of every song downloaded to a Verizon phone to the user's Rhapsody account. And Rhapsody subscribers will be able to transfer subscription-based music to Rhapsody-compatible Verizon phones once they're introduced later this year. But don't expect to download subscription tracks over the air from Verizon phones just yet.

On paper it's a strong alliance that emphasizes each partner's strengths and eliminates their weaknesses in what MTV Networks president Van Toffler called a "perfect storm" of capabilities. Whether they can execute it is another story.

WAL-MART

The big-box retailer has started a public relations initiative to highlight the availability of digital-rights-management-free (read: iPod-compatible) music from EMI and Universal Music Group. This is a particularly big deal for Wal-Mart, which has not been able to translate its success as a physical retailer to digital music. While it is responsible for about 22 percent of physical CD sales, Wal-Mart has less than 2 percent market share among music services, despite undercutting the competition on price. Protected tracks are 11 cents cheaper than on iTunes, while DRM-free tracks are 35 cents cheaper.

But this probably won't matter much until Wal-Mart can sell all its music without DRM, not just music from EMI and UMG. And the conservative company sells only edited versions of songs that otherwise would earn a parental advisory notice.

YAHOO MUSIC

Yahoo has unveiled plans to launch a Web-based music player that will allow current and non-subscribers to stream music from the service without requiring them to download the full Yahoo Music Unlimited software.

While its music portal receives more than 25 million unique hits per month, the Yahoo Music Unlimited subscription service continues to struggle for mass-market attention, just like every other subscription service out there.

According to Yahoo Music general manager Ian Rogers, the idea is to give its broader Internet community access to the same tools as subscribers and eventually convert them into paying members. Non-subscribers can hear only 30-second samples, while members can listen to the entire track.

Reuters/Billboard