BOSTON (CNN/Money) -
As any longtime reader of this column knows, I'm a Red Sox fan. And in my corner of the baseball world, for as long as I can remember, the enemy has always been the Yankees, even as other baseball contenders have come and gone.
On the West Coast, the familiar foes in the computer industry are Microsoft (MSFT: Research, Estimates) and Apple (AAPL: Research, Estimates). And today's expected launch of Microsoft's online music service will heat up that rivalry once again.
At press time, Microsoft wasn't revealing any details on the service, but it's expected to sell individual tracks and albums in the Windows Media format. It's not clear whether Microsoft will offer a subscription plan, à la Napster and RealNetworks's Rhapsody service.
How to play the launch
How should investors play this launch? By shorting Apple? Um, no. This is a launch to keep an eye on, but at least in the short term, Apple's lead is too great to be affected very much by Microsoft's entry. Will Microsoft's debut alter the digital-music industry? Yes, but its success is hardly assured.
"When an 800-pound gorilla jumps into the water, it makes waves," says Michael Gartenberg, an analyst with Jupiter Media. "The question is whether the gorilla knows how to swim."
Microsoft, of course, has a poor history when it comes to swimming outside its software pool. Many of its peripheral launches have faltered, while others have taken longer than expected to establish a footing -- like the MSN service, which is only now, after nine years, beginning to turn a profit.
What's more, the digital-music industry today is driven by devices, and the iPod is the ne plus ultra of that category. Until the non-Apple world can craft a device that comes close to the iPod in capturing the popular imagination,
"Apple dominates this market," says Gene Munster, an analyst with Piper Jaffray. He estimates that 80 percent of all legal downloads are from iPod users. "You can spin a bottle to see who will be in distant second place."
The second-place slot
RealNetworks (RNWK: Research, Estimates) is making a go at that second-place slot, recently dropping the price of its downloads to 49 cents and offering a software bridge to users that enables them to play songs from Real on an iPod.
The strategy has played out well in the short term, with 1 million songs sold the week the company announced the price cut. Microsoft's entry will likely tighten the squeeze on Real, especially if Microsoft offers a subscription service.
"We are now clearly the No. 2 music store and expect we will continue to be in a leadership position going forward," says Erika Shaffer, a spokeswoman for Real.
Today's launch won't include the Janus technology, Microsoft's digital-rights management system. Janus will allow users who buy a monthly all-you-can-eat digital-music subscription to transfer downloaded songs to their portable devices. When it comes out this fall, it could boost the fortunes of the other subscription model services, such as Napster.
That's only the beginning of a series of innovations that will make this fall the biggest season yet for online music. Virgin Music is launching its subscription service and Yahoo! is rumored to be doing the same. That's when the real intense fighting will begin and we can finally handicap the winners and losers.
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