Digital Santa: Stalking The MP3s

From left to right: Sony's Walkman Bean MP3 player; the Apple iPod; and the Rio Carbon MP3 music player.
CBS/Sony Electronics/AP
All this week, tech guru Larry Magid looks at the latest in high-tech gifts for the holiday season.

The Apple iPod isn't just a success. It's a runaway bestseller, accounting for as many as nine out of ten portable digital music players, depending on what numbers you believe. But just because the iPod is extremely popular doesn't necessarily mean that it's the best choice for everyone.

To its credit, Apple has built a very effective infrastructure around its portable devices. Not only does it sell elegantly designed and easy to use hardware, it also gives away its iTunes music player software that makes it very easy to buy songs and transfer them to the iPod.

Apple continues to innovate. In the last three months the company has introduced two popular new models: the incredibly thin iPod nano, which stores up to 1,000 songs in a device thinner than a No. 2 pencil, and the new iPod, which stores up to 60 gigabytes (15,000 songs) and plays video clips.

Apple has even cut deals with two major TV networks to allow iPod users to purchase and watch popular TV shows. What's more, Apple has jumped on the podcasting bandwagon, making it easy to download and play Internet-based radio programs from thousands of sources including CBS News.

Great features aside, Apple's most important asset is its marketing. Between its commercials, billboards, word of mouth and inviting Apple stores, the company has turned its little music player into a must-have cultural icon. For many people, especially younger customers, the iPod literally synonymous with digital music.

Yet, despite having to settle for their share of what's left after Apple takes its enormous bite out of the market, the competition offers some pretty compelling alternatives. Anyone thinking about buying an iPod for the holidays would be wise to take a few minutes to consider what else is out there.

Click here to check out Larry Magid's interview with Phil O'Shaughnessy of Creative Labs, with more tips on shopping for MP3 players.

One thing that distinguishes the Apple products from of the competitors is the format of the music you download and where you get it from.

While all portables will play the industry standard MP3 files that you can get from your own CDs or illegally download from the non-sanctioned music service, the music that you download from paid services isn't encoded in MP3 because MP3 lacks the ability to embed digital rights management (DRM) that enables the recording labels to limit what you can do with the songs.

Apple encodes its downloaded music as AAC, which is only compatible with the iPod, while most other services encode in WMA, which works with most other players. Whether AAC or WMA is a better format is debatable and largely irrelevant (the differences in quality are slight and vary depending on the type of music) but the bottom line is that music you download from a service can only be played on a compatible player.