Ganging Up on iTunes

By Rick Aristotle Munarriz
June 30, 2008 | Comments (0)

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Oh, if only it were this easy to topple a giant.

RealNetworks (Nasdaq: RNWK) and Verizon (NYSE: VZ) are out to steal market share from Apple's (Nasdaq: AAPL) iTunes Music Store. Unfortunately for the digital music pretenders that don't have Steve Jobs at the helm, dreams of vanquishing Apple amount to little more than wishful thinking.

Oh, they'll talk a big game. In launching its new "Music Without Limits" initiative Monday morning, RealNetworks said it will enhance its Rhapsody music subscription service by offering the a la carte sale of MP3 singles and albums. The problem? Napster (Nasdaq: NAPS) is already doing this, and Napster is one of the few stocks trading for a fraction of its balance sheet greenery.

This doesn't mean that RealNetworks is following warm footsteps to nowhere. The company is offering full-track playback through social music sites, powering the online music store of Verizon Wireless' V Cast, and offering free digital albums to the next 100,000 warm bodies who register with Rhapsody's music store.

Nice try, kid. Better luck next niche.

Apple has delivered more than 5 billion digital downloads since the inception of iTunes. Proven online retailers like Amazon.com (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT) have been selling music tracks free of digital rights management since last year. To beat iTunes, you have to out-iPod the iPod, and we've seen how even an innovative and heavily bankrolled competitor like Microsoft's (Nasdaq: MSFT) Zune can dream big, only to wake up empty.

This doesn't mean RealNetworks needs to wake up or throw its hat into hardware. It just needs to go in with realistic expectations. Clever press releases, viral gimmickry, and a massive giveaway will only take you so far.

Other warm footsteps to follow:

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Longtime Fool contributor Rick Munarriz has purchased MP3s from Amazon and takes advantage of Napster's free lo-fi streaming service, but still winds up with Apple more often than not. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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