Apple may be forced to loosen control of its digital music ecosystem in the wake of RealNetwork's Harmony announcement.
Real this week announced its new Harmony technology, which lets those buying music from Real transport and play that music using a myriad of music players, including Apple's iPod. iPod owners could not use music acquired from Real's store until then.
Apple presently operates a closed system, tying music purchased from its Music Store for playback using only iTunes and iPods. The latter product will also only play digital music acquired from iTunes Music Store, and from platform-agnostic services such as eMusic, Wippit and Trackitdown.
Four-way digital deathmatch
When it comes to formats that protect legally sold digital music, four main forces exist in the market. These are: Microsoft Windows Media (as used by Napster, OD2 and more); Apple's FairPlay (used only by Apple); Sony's ATRAC format (Sony Connect only); and Real's proprietary technology, which supports Harmony.
Apple has spurned many attempts to license its proprietary digital rights management standard, including one from Real. Spurned, Real allegedly reverse-engineered FairPlay in order to build Harmony.
Real announced Harmony at a high-profile industry event this week, where Apple's vice president of applications and Internet services Eddy Cue was scheduled to speak. Cue cancelled the appearance because of sickness.
War or peace, or war and PC?
CNN this morning questions what is happening at Apple headquarters in the wake of Real's news.
Should it sue Real? If it does, what will consumers think? CNN asks: "Is it strategically more important to preserve its closed system, or is the iPod the future profit machine for the company?"
Forrester Research analyst Josh Bernoff observes: "They need an answer that doesn't sound anti-consumer and yet preserves the system they've built for themselves."
However, Apple's news of a deal to bring iTunes Music Store to mobile phones from Motorola means the company is able to consider licensing FairPlay where it makes business sense.
Real is already in discussions to license Harmony. This means Apple must act quickly to either stop Real in its tracks through legal action, or explore new ways to license its proprietary technology - which could boost iPod sales, some say.
Needham & Co analyst Charles Wolf said: "Harmony could help iPod sales. It could also take some sales away from the iTunes store, but it's the iPod that makes the money".