Coke's European Tune

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When people think of Coca-Cola (NYSE: KO), the first thing that springs to mind is, of course, downloadable music.

OK, that may not be how many of us here in the good ol' U.S. of A. know Coke, but Europe is a different story. That's because the website mycokemusic.com is Europe's biggest online music store, selling 500,000 tunes since it launched in January. The site, sponsored by Coke and run by Europe's music download outfit, OD2, has been a nifty marketing gimmick for the soft-drink specialist, which gives away free downloads on Coke cans or bottles as prizes.

But now Steve Jobs and Apple (Nasdaq: AAPL) are threatening to rain on Coke's parade. Apple has launched its highly popular iTunes music service in Europe, and mycokemusic.com may have trouble keeping up. After all, it only offers approximately 350,000 songs, while iTunes features 700,000.

Coke may think twice about pumping more funds into its site to counter iTunes. The more important factor will be how the software provider behind mycokemusic.com reacts. OD2, Europe's leader in the online music game, powers dozens of European sites that offer such features. The company, launched by Peter Gabriel, once upon a time of the rock group Genesis and later a solo artist, is plugged into the music scene and probably won't take iTunes' entry lying down.

The battle will be interesting to watch, but for all parties involved it may not be particularly profitable. The downloading business reportedly carries razor-thin margins, so sites have to make money on volume. iTunes has been dominant in the U.S., but with Roxio (Nasdaq: ROXI) recently entering the European market and several other companies hungrily eyeing the continent, competition will be tight. But as they say, it ain't over 'til the fat lady sings.

Fool contributor Brian Gorman is a freelance writer living in Chicago, Ill. He does not own shares of any companies mentioned here.