Markets

Can Lilliputians Topple the iTunes Giants?

By Karen Steen

Updated on: September 18, 2008 / 3:15 PM EDT / MoneyWatch

This week, those in the music industry expected a minor player to challenge Apple iTune's hegemony of digital music. And it may have happened -- just not in the way anyone expected.

The anticipated news was the debut of online store MySpace Music. But the launch was delayed, apparently by drawn-out negotiations with EMI, the last of the big four music companies to sign with the social-networking site.

Meanwhile, here's what did happen this week:

Yahoo offered streaming music with search;
Best Buy bought Napster;
And Microsoft released a surprisingly fresh version of the Zune.

Individually, none of these moves looks likely to threaten the mighty iTunes, but combined they may change the game enough to break up Apple's whopping 73 percent market share. Yahoo's music streaming cleverly drafts off of existing music sites instead of trying to compete. The Napster purchase puts access to DRM-free music files in the hands of a major retailer. And the Zune's new connections to radio and wi-fi hotspots make discovering and downloading music much easier than iTunes does.

If music services continue to diversify -- expect MySpace Music to widen the net further when it does launch -- each could grab a larger piece of the pie, and iTunes may find its considerable margin starting to narrow.