Digital Home Thoughts: Real CEO: "Open iPod to other Music Services"

Real Networks CEO Rob Glaser publicly lambasted Apple for locking consumers into its own music download service. Currently the iTunes Music Store only supports Apple's AAC audio format. 95% or all competing services such as Napster, Wal-Mart, and BuyMusic.com all support Microsoft's highly popular WMA audio format....a format which the iPod does not support.

"Apple's (market) share will go down if they continue to do this. The only way to presently put songs on an iPod is to (buy) them from iTunes," Glaser said, referring to downloads purchased from online music stores. In addition to iTunes songs, the iPod can play files encoded in the MP3 format, including tracks ripped from CDs.

Glaser predicted that customers will say, "I bought an iPod and can only shop at one store. What is this? The Soviet Union?"

Although one could interpret this as sour grapes (Real's Rhapsody music service competes with iTunes), I agree with his argument. I've often vented this opinion as well. Apple is making a strategic mistake by locking consumers into ITMS. While Apple's service is far more popular than any other, the entire industry is standardizing on Microsoft's audio format. Which means iPod owners won't have access to competing services, which stifles competition. For example, Wal-Mart recently launched it's own venture, offering tracks for just $.88 while Apple charges $.99. Since iPod owners don't have the option of choosing Walmart, they are at the mercy of Apple to lower prices, which may not happen. If this policy does not change, iTunes could be squeezed out, not by one player, but by the cumulative effect of dozens of competing vendors offering better options and pricing.