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10/5/2006
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Best Buy, SanDisk, RealNetworks Unveil Player, Digital Music Store

The online music store and portable device will compete with Apple and with Microsoft's upcoming Zune.

Retailer Best Buy, music software maker RealNetworks and player manufacturer SanDisk unveiled on Thursday an online music store and portable device that would compete with Apple Computer and with Microsoft's upcoming Zune.

The announcement highlights the formation of three major camps within the emerging online digital music business. All three are focused on tight integration of player with digital music store, a strategy developed by Apple that has given the company a strong early lead. Apple's iPod, which is closely tied to the company's iTunes store, currently accounts for more than three quarters of the market for portable music players, analysts say.

RealNetworks, which has developed its own digital music platform, is aggressively seeking partners among player manufacturers. The company also has its own music store and subscription service called Rhapsody, which will power the Best Buy Digital Music Store. SanDisk will provide a tightly integrated device called the Sansa E200R. The online store and player are scheduled to launch Oct. 15.

In joining RealNetworks and SanDisk, Best Buy, a nationwide consumer electronics retailer, will be competing with, while also selling, the iPod. The Minneapolis-based retailer also plans to sell the Zune player, which is set for release next month in time for the holiday shopping season.

Best Buy plans to teach its sales force to recommend to customers the service and player that best matches their needs, a spokesman said. Apple, for example, doesn't have a subscription service, while Best Buy's store will. Best Buy sales clerks do not work on commission.

"The bottom line is we want customers to come back to us," company spokesman Brian Lucas said. "The key is to make sure we're asking the right questions, so we can match them with the service that's right for them."

Best Buy looks at the launch less as competing against suppliers, and more of trying to grab a piece of a growing market.

"It's about growing the pie altogether, and getting more people to experience digital music," Lucas said. "There a lot of potential in the space still."

The online store did not require a major investment on the part of Best Buy, given that it partnered with RealNetworks for the software platform, Lucas said. In addition, the music marketplace would give the retailer the opportunity to work with popular artists to promote them and the company's brand. Among the artists the company currently works with is rapper Diddy.

Nevertheless, it's unlikely Apple will want to give up its market dominance, or Microsoft will settle for anything less than toppling the leader. On the other hand, RealNetworks, which has partnered with SanDisk, certainly hopes to grab what it can from the two Goliaths.

The trio each uses their own copyright-protection technology, which tends to hold customers to the companies' respective music services.

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