Apple will make more money from iTunes and the iPod if it lets the industry's rival players share its software standards.
Business Week's Alex Salkever said: "Pushing a standard that stands apart from everyone else in the computing and digital-device world may prove to be short-sighted."
"If Apple really wants to boost AAC it should allow other device and software makers to license Apple's own FairPlay digital-rights-management (DRM) system.
"Apple may wind up isolated with a standard nobody else is using."
Salkever added: "It doesn't have to be this way. Apple could still guide digital-music standards for years to come – and create a more open, competitive marketplace that will ultimately benefit everyone – except Microsoft. How? By letting go of FairPlay and trusting the market – as well as its own ability to make killer consumer devices.
"By allowing competitors to leverage the already popular AAC/FairPlay combo, Apple would give them a strong alternative to WMA. Apple might lose out a bit in the short run. But it would be far more likely to prevail over the long haul if it allowed these natural allies into the fold.
"If Apple truly believes it can make the most innovative music players and software, then it has little to worry about from competition. Standards barriers that ghettoize Apple's music efforts pose a far greater long-term risk."
The report concludes: "Apple could end up making boatloads of money if iTMS becomes one of the handful of default players and stores for what will clearly be a multibillion dollar market."