COMPUTER INDUSTRY Will Apple's online music service take a bite out of competition?

The company tried to keep details of its service secret.
Apple Computer was to unveil its online music service today -- an initiative that may either give a much-needed boost to the beleaguered record industry or become immediately irrelevant.
Cloaked in an air of mystery, Apple's much-anticipated service has generated a healthy buzz among record-label executives and music fans. But a federal judge stole Apple's thunder Friday by unexpectedly ruling that two leading sources of free music online don't violate copyright law.
Although U.S. District Judge Stephen V. Wilson held that making unauthorized copies of songs and movies on file-sharing networks is illegal, his approval of the technology used by Morpheus and Grokster could send the wrong message to consumers, said analyst P.J. McNealy of research firm GartnerG2. And that spells trouble for Apple Chief Executive Steve Jobs as he tries to get his new service off the ground.
"The ruling could completely undermine any momentum Apple hoped to have coming out of [today's] announcement," McNealy said. "It makes it monumentally more difficult" to compete with file-sharing systems "than it was last week."
Apple has tried to keep details of the service under wraps.
But sources who have been briefed on the service disclosed that the company will offer songs that owners of Apple computers could easily retrieve from a vast online library, download and move to new iPod portable music players.
Who can use it
The service first will be available only to Apple computer users, the sources said, although it may expand relatively soon to encompass the far larger market of computer owners running PCs with Microsoft Corp.'s Windows operating system.
Music industry executives have praised the Apple service, saying it's easier and more inviting than any of the other online music outlets they've sanctioned. But at the labels' insistence, the Apple service still will have a layer of complexity that's missing from Morpheus, Grokster and their ilk: the music files won't be in the MP3 format, which can be easily copied, burned onto a CD and moved to many digital devices.
Instead, they'll be scrambled to deter piracy.
The new format means Mac and iPod owners will need new software to play songs from the service, which sources say will be sold for about $1 per track. The service will be integrated into an updated version of Apple's iTunes software, enabling users to search for, buy and download songs through the same program they use to organize and play music on their computers.
Unfortunately for Apple, that's the same functionality offered by software from Morpheus, Grokster and similar file-sharing systems. And their songs are free.
One advantage for the companies offering authorized copies of songs online, including MusicNet Inc., FullAudio Corp., Inc., Streamwaves and Pressplay, which is jointly owned by Universal Music Group and Sony Music Entertainment, is reliability.