Apple Won't Get Real

It sounds like a good idea: A couple of scrawny lightweights banding together to try to fight off the playground bully. Will they succeed and keep him from nabbing their lunch money? Not if one of the 80-pounders is too proud to take a partner, and the other is considering a comfortable position as the bully's toady.

That's how things look now that Apple (Nasdaq: AAPL) seems to be blowing off the recent overture from RealNetworks (Nasdaq: RNWK). Reported yesterday, RealNetworks CEO Robert Glaser wrote to Apple's head honcho, Steve Jobs, last week and suggested that it tweak the hugely popular iPod to enable it to play RealNetworks' files, ostensibly in an effort to head off Microsoft's (Nasdaq: MSFT) feared future foray into online music sales. RealNetworks' PR department blabbed enough to get plenty of headlines.

What the headlines downplayed, however, was Glaser's threat to take its business to Redmond, a hard-nosed and curious move in light of the European Union's recent decision to fine Microsoft for its perceived victimization of RealNetworks.

In fact, the spurned proposal looks like a good idea for Apple. Real's subscription services recently added over 100,000 users in a single quarter, bringing the total to more than 450,000. That's a lot of committed music fans, and I bet they'd appreciate being able to drop their tunes directly onto a shiny new iPod.

If Apple continues to give RealNetworks the hairy eyeball, it wouldn't be the first time the firm has shot itself in the foot by refusing to play nice with others. It was, after all, Apple's stubborn refusal to permit cloning that let the far less snazzy PCs and Microsoft operating systems take over the world.

Given that Apple sells more music players than computers these days, it would be wise for the firm to look at the big picture, and even make a deal with the devil himself -- by updating the iPod's firmware to play Windows Media files, like every other MP3 player on the planet.

Won't that take a bite from Apple's own iTunes service? Maybe, but let's be clear: iTunes barely makes a profit anyway, and with competition coming from Wal-Mart (NYSE: WMT), Dell (Nasdaq: DELL), and others, there's no way Apple can have the online music market all to itself. But if Jobs and company can swallow their pride for once and learn from their past screw-ups, they could use the iPod to cash in on everyone else's success -- even the bully's.

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Fool contributor Seth Jayson looks forward to more impassioned ranting from diehard Appleheads. He has no stake in any firm mentioned above. View his Fool profile here.