Tuesday, August 16, 2005

The market for legitimate music downloads is booming, but the stumbling block of incompatibility will not go away.

Just ask anyone who has ever tried to put a Napster track on an iPod.

At the heart of the problem are duelling digital-rights-management (DRM) systems from bitter rivals Apple Computer and Microsoft. Files using either company's DRM are incompatible with players that support the other DRM.

The recording industry and many of its digital retail partners flagged this problem 18 months ago. Today they are no closer to finding a solution, thanks to a lack of co-operation among the tech heavyweights.

Microsoft's Windows Media DRM is supported on more than 60 devices and used for digital files sold by dozens of retailers, including Napster, AOL, Yahoo, RealNetworks, Virgin, FYE and Wal-Mart. Apple's DRM is called Fair Play and works only in Apple-controlled products and services like the iPod and the iTunes Music Store.

As more consumers go digital, the compatibility issues between Apple and Microsoft become more pronounced. Apple, the early market leader, has been particularly resistant to shaking hands in the interest of compatibility.

More than 184 million digital tracks were sold in the United States this year through the end of July, according to Nielsen SoundScan. That is almost double the amount sold during the same period in 2004.

Still, some digital-music executives say compatibility problems are slowing the growth of legitimate download sales and subscription services.

"It's unquestionably holding the market back," says David Pakman, managing director of Dimensional Associates and head of digital music retailer eMusic. "If everything was interoperable, then certainly sales would be higher."