Netflix held a conference call in the US on Tuesday to discuss its less-than-stellar Q3 earnings. CEO Reed Hastings acknowledged that it failed to meet a quarterly goal for signing up new customers to its streaming service, and will now miss its full-year target of 7 million new streaming customers. According to its revised subscriber numbers, Netflix will now finish the year with between 4.7 million and 5.4 million new streaming subscribers.

During the call — which included CFO David Wells — the pair received a number of questions around the Netflix push into international markets, and what the poor figures will mean for expansion plans.

Hastings confirmed that an Asia push is still a possibility, stating that as Asian markets can be a tough run for Western companies, partnering with local companies in the same video-on-demand (VOD) space is “definitely a factor” that Netflix is still considering.

Exactly what the company considers “Asian markets” wasn’t too well defined in the conference, although Netflix has been hinting at an Asia-Pacific move for some time now.

Earlier in the call, Hastings addressed a question from an analyst who wanted to know about the effects of “seasonality” and the Olympics on Netflix’s performance. Netflix has previously said that the London 2012 Olympic games and warm summer months sapped demand for video entertainment, and suppressed new subscriber additions.

But with a golden opportunity to dump the company’s troubles on these factors, Hastings appeared to tear up the script.

“You’re very gracious, because I imagine what you really feel is: ‘why do we make seasonality excuses and then Olympics excuses?’ And aren’t you getting tired of hearing it?'” Hastings told the analyst. “We are tired of making those excuses, as opposed to getting back to our track record.”

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Trent Reznor of the band Nine Inch Nails walked into the Santa Monica, Calif., headquarters of Musicane last month and stunned the start-up’s employees with his tech knowledge and fierce attention to detail.

Typically, when artists sign on with Musicane, a company that helps musicians distribute their music online, they are satisfied with letting Musicane’s programmers, administrators, and designers make the decisions, said CEO Sudhin Shahani. (After all, William Adams, or “Will.i.am,” of the Black Eyed Peas is the company’s marketing chief.)

But Reznor had his own ideas about bit rates, Web design, and pricing. He even toiled over the text messages customers would receive when their purchases were confirmed. And all this work was for someone else’s album. Reznor had hired Musicane to provide fulfillment for The Inevitable Rise and Liberation of NiggyTardust a record by rapper Saul Williams, which went on sale Thursday on Williams’ site. Reznor was the album’s producer.

“Trent is well-informed, articulate and is very knowledgeable about technology,” Shahani said. “We had a great meeting, but he didn’t hesitate to disagree or say what was on his mind. He was extremely detail-oriented. There’s not a word on the site that he didn’t read or, most likely, write himself.”

Reznor last month left music label Universal Music Group, and the administrative tasks he undertook for Williams could teach him some valuable lessons. Nine Inch Nails, Radiohead, Oasis, Madonna and a growing number of other artists have fled the big record companies and are taking more control of their music distribution. While striking out on their own offers more freedom, the performers also lose the label’s prodigious distribution and marketing muscle.

In the future, these musicians may find themselves being forced to make decisions about technology, customer service, and marketing. That’s where companies like Musicane, Indie911, Fuzz, Snocap, TuneCore, and dozens of others come in. They offer to free artists from the music-label yoke by helping them manage the chores that come with selling music online.

In the case of NiggyTardust, Musicane distributes the digital downloads, accepts credit card transactions, and provides customer service. Shahani declined to say what the company charged Williams for the service, but he did say Musicane typically receives a 20 percent cut of all transactions.

The company, founded by Shahani, 24, and Vikramaditya Jain, 25, also provides promotion assistance by providing artists with a media player that fans can embed on Web sites, blogs, and social-network profiles.

The player presents a performer’s music, videos, photos, and text, and allows fans to buy music or merchandise without being sent to a new Web page. Snocap has a similar tool, which it refers to as a digital-music vending machine.

Music promotion is vital to Internet music sales because this is the area where the labels are supposed to be strongest. As Shahani pointed out, the “labels are expert at making stars.” While the Internet allows anyone to boost their profile by posting a Web page, how is an unknown act supposed to get heard when legions of performers are doing the same thing?

The Internet shouldn’t be sold short as a platform to introduce new stars, Reznor said in an interview Tuesday. The Web is starting to replace some of the traditional methods that record companies have used to promote acts, such as radio and music magazines. Yet, he’s not totally sold on the popular belief that MySpace.com can help up-and-coming bands find an audience.

“I don’t go on MySpace,” Reznor said. “I find it chaotic, and it looks ugly to me. I’ve been going to more and more blogs to discover music. I think they’re replacing radio stations and music magazines. I don’t trust what Rolling Stone has to say. I don’t believe them anymore. I go to a few Web sites that have similar tastes as I do.”

Another factor that has irked music fans about downloads is copy-protection schemes. Musicane allows artists to choose whether they want Digital Rights Management (DRM) software attached to their music or not. In Williams’ case, he and Reznor chose to deliver the songs in an MP3 format free of DRM. This allows users to play the songs on iPods, Zunes or any digital-music player.

Musicane also enables performers to offer music at different bit rates. Williams and Reznor decided to offer a choice of bit rates depending on how much fans forked over for the music. NiggyTardust can be obtained for free, but at that price the songs are only available at 192Kbps. For a $5 donation, buyers get music at 320Kbps or the higher-end FLAC lossless format.

The technology is there to make bands their own music distributors, but there is still a learning curve. For some, the transition has not been without its bumps. Last month when Radiohead released a digital version of its latest album, In Rainbows, some fans were miffed when heavy traffic at Radiohead’s site caused long delays in downloading music.

And then there’s the question of whether Musicane and similar services make sense for unknown acts that are still trying to build followings.

“For established musicians, it’s a different ballgame,” said Susan Kevorkian, a digital music analyst with IDC. “For bands who have worked with labels over the years and who have developed followings, the technology is in place to reach their fans much more directly without needing labels’ marketing expertise. But for emerging groups to leverage the same technology to attract a following is a long row to hoe.”

Correction:

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A correction was made to this story. Read below for details.

news analysis Apple has plunged into uncharted waters by stripping security software off some of its music.

Never before has Apple sold songs without attaching antipiracy software–the digital rights management systems that prevent file sharing and are hated by many music fans. If successful, Apple’s bold gamble to do away with digital rights management, or DRM, could act as a whirlpool that sucks the rest of the music industry into DRM-free music, say analysts.

Apple on Wednesday from record label EMI. Shoppers have the option to purchase either a 256kbps AAC-encoded DRM-free song for $1.29 via iTunes Plus, or the usual 128kbps AAC-encoded DRM version for 99 cents.

The move is important on many levels. For the first time, consumers can play music from Apple’s iTunes on digital players other than the iPod. For Apple, offering DRM-free songs could hand the company some credibility in dealings with European regulators, who want the company to open up iTunes to third-party hardware makers.

For the record industry, it once again may find itself being herded into a direction of Apple’s choosing. In this situation, the record companies can only benefit, said Greg Scholl, president and CEO of The Orchard, a New York-based music distribution and marketing company.

“The only way we’re going to discover the right way to grow the market is by experimenting,” Scholl said. “I think the price Apple is charging is still too high and will probably inhibit (sales). But right now there isn’t enough data to know what the right pricing is or how to market digital music. At least Apple is trying something new.”

It’s important to note that the music being offered without copy protection by Apple and EMI represents only a fraction of the most popular music.

The majority of Apple’s 5 million songs still feature Apple’s FairPlay DRM scheme. EMI is the only one of the four top record labels to release unprotected music. The other four account for 70 percent of the world’s music. While Apple said it expects half of its music to be available on the site without DRM, most of it likely would be the millions of songs iTunes offers from independent labels.

A low-key launch
Curiously, Apple didn’t exactly ballyhoo the new service. The company on Wednesday placed an advertisement on iTunes’ front door amid a handful of other promotions. Customers must also first upgrade to the latest edition of iTunes in order to obtain EMI’s unprotected songs.

That DRM-free music wasn’t promoted heavily worried Scholl.

“I would think that if you’re a major label and you don’t want something to work, the best plan would be to hide it,” Scholl said.

Even the staunchest DRM proponent must recognize that copy-protection software is losing some momentum. Two weeks ago, Amazon.com–the fourth largest distributor of music online–announced that a new digital music store due to open soon would also feature unprotected music. Industry insiders told CNET News.com that they expected other top e-tailers to soon try out DRM-free music.

Even Microsoft is following Apple’s lead. Immediately after CEO Steve Jobs issued his February letter calling for an end to DRM, Microsoft said the total abolition of such protections would be irresponsible since they are needed for subscription music and other new business models. But the company reversed itself in April and announced plans to offer DRM-free music from EMI and others.

What Apple has succeeded in doing is to raise questions about how the music industry is pursing its digital music strategy, said Susan Kevorkian, an IDC analyst.

Chief among the questions is why the record labels place copy protection on digital songs but not on CDs.

“CD specifications never included native content protection,” Kevorkian said. “New CDs purchased today aren’t protected either so there’s been this inconsistency in the music industry’s strategy. When you have an unprotected CD, you can rip songs to MP3s and do with them what you want. We think that by pursuing a more consistent digital strategy the potential is there to reach more consumers.”

The record industry has said in the past that placing copy protections on CDs is expensive. The format was developed long before the digital age or the “consumer-oriented Internet” emerged, said one record executive who asked for anonymity because she was not authorized to speak for her company.

Regardless, Apple’s DRM-free offering shows how easily the company can put the record industry on the defensive. What happens if DRM-free music on Apple becomes popular?

Kevorkian suggests the music industry start worrying less about fighting piracy and more about profiting from downloads.

“They can try new strategies around prices and marketing, particular to older buyers,” Kevorkian said. “There are different paths to go down to drive music sales and those paths are better than what we’ve seen to date.”

Correction: This story misidentified the DRM-free format Apple is selling. The songs are on AAC.

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It used to be that music fans believed cryptic messages about Satan or the death of a band member were hidden within rock albums.

Nowadays, the secrets buried in digital music are way too easy to find, according to the Electronic Frontier Foundation (EFF). The consumer watchdog group, which focuses on the Web, is taking issue with Apple’s practice of embedding customer information within iTunes music.

Apple includes customer names and e-mail addresses within song files purchased from iTunes, according to Fred von Lohmann, an EFF attorney. Several tech blogs wrote about the embedded information this week after Apple launched iTunes Plus, a service that features music stripped of controversial copy-protection software.

Von Lohmann pointed out that data could easily be compromised if an iPod is lost or stolen.

“It’s not as bad as losing a credit card number,” von Lohmann said, “but it’s still information that people wouldn’t want floating around out there–especially without them knowing about it.”

Apple hasn’t said why the company would leave customer information exposed. But some observers have speculated that Apple is adding watermarks to music files. Watermarking describes the practice of inserting identifying information into digital files so they can be tracked. Privacy groups frown on such practices, but von Lohmann doubts that these were Apple’s intentions.

Mike Goodman, a Yankee Group Research analyst, argued that watermarking is “certainly better than digital rights management.

“Watermarking does not treat the consumer like a criminal,” Goodman said. “DRM is also restrictive, telling you how many times you can play a song or which device it can be played on. Watermarking works on the assumption that a consumer is innocent but provides the industry an opportunity to catch someone that breaks the law.”

Ars Technica and Tuaw earlier reported on the personal information within iTunes’ music.

  Correction: This story erroneously reported that Apple had in the past encrypted personal information of iTunes customers embedded within music files. The data is available in clear text.

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Critics of digital rights management have long insisted that record labels could boost sagging sales by offering music unencumbered by copy-protection schemes.

Apple’s iTunes and e-tailer Amazon.com are in position to test this hypothesis in the coming months. On Wednesday, Amazon announced that it plans to sell digital songs from record label EMI Group that will be DRM-free. Amazon’s unprotected music, which will be sold from the retailer’s upcoming download store, can be played on a wide variety of portable music players, including Apple’s iPod and Microsoft’s Zune. Amazon’s announcement follows one last month from Apple, which is also due to begin selling unprotected music from EMI.

The music industry– struggling with one of its worst-ever sales slumps–will be closely watching how Amazon and Apple fare. If they are successful in moving a lot of songs, then that might convince the other three major record companies to strip DRM from their music. If sales are lackluster, then that might spur the labels to wrap songs in even tighter copy protection, say industry insiders.

“DRM is the only thing that has given the industry any kind of control,” said one record executive, who requested anonymity.

David Card, an analyst with JupiterResearch, said it’s going to be hard for Amazon and Apple to prove anything by selling music from only one of the four major labels.

“Amazon is a strong endorsement for this (unprotected music) strategy,” Card said. “The question of whether it’s enough to tilt the tables away from DRM remains to be seen. The sales would have to be huge to bring the others on board.”

Representatives from Warner Music Group, Universal Music Group and Sony BMG declined to comment.

Sales of traditional CDs are in a free fall. The industry reported a 17 percent decline in album sales so far this year. Ipsos Insight, a Chicago-based market research firm, issued a report recently that showed a 15 percent drop from 2002 in the number of U.S. consumers who had bought a CD within the past six months. The music industry is waiting for music downloads to make up these losses, but that hasn’t happened yet.

The question of whether DRM-free music will appeal enough to consumers to make them pay for it may be answered by music fans like Elise Malmberg and her husband, Joe Gore.

The San Francisco couple are musicians, music critics and owners of more than 500GB of music. The couple listens to songs on iPods and other devices.

“DRM is kind of a moot conversation,” said Malmberg, who bought her last CD from Amazon in December. “The record labels are trying to control something that’s totally out of their control. People can access songs now regardless of DRM. It doesn’t help.”

If the price is right …
Gore and Malmberg rip most of the songs they listen from albums and load it on to their iPods. While the pair does buy some music from iTunes, they don’t tolerate Apple’s copy-protection software.

“We know a way to convert everything into regular MP3s,” Malmberg said. “We can then move them around to any device we want. It’s ridiculous for them to say I can listen to songs only on the players they say I can.”

Amazon and Apple could end up frustrating consumers, many of whom have long resented having to figure out what music formats and DRM schemes are compatible with the many music players available, said Susan Kevorkian an analyst with IDC.

“By offering both DRM-protected music and songs without, these retailers are adding another level of complexity,” Kevorkian said.

Nonetheless, Malmberg, 44, and Gore, 48, said they would absolutely buy unprotected music from Amazon as long as the retailer’s new site is simple to use and sells songs at the right price.

Look for other retailers, including Wal-Mart, to offer DRM-free music, said music-industry sources. Amy Colella, a Walmart.com spokeswoman said the company has yet to decide its next move.

“We know digital music interoperability is important to our customers and continue to evaluate these types of opportunities,” Colella said.

Jeanne Meyer, a spokeswoman for EMI, declined to identify which retailers would next begin offering unprotected music. “We’re out talking to everyone,” she said.

If EMI is able to stir up interest in DRM-free music among retailers (Apple is responsible for 80 percent of all music downloads), it may help push other labels to at least try it out, according to industry insiders.

One executive from one of EMI’s rival labels said that the fear among DRM proponents within the record industry is that the labels could be “swept up” into copy-free music should it take off with retailers.

They may be right to tread lightly here. Not even Malmberg is convinced that offering consumers a way to listen to music on multiple devices is the way to cure what ails the record industry. She said that too many consumers have gotten use to paying little or nothing for songs.

“Ultimately I don’t think digital music will be a primary product,” Malmberg said. “I think it will be a value-added thing that’s used to sell other products.”

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Michael Robertson, one of Silicon Valley’s most prolific company creators, continues to plug along with so-called music lockers.

His most recent music company, MP3tunes, began offering the lockers for free last week in an apparent attempt to draw interest from consumers. Music lockers enable a customer to store music on a company’s servers and later retrieve songs by having them streamed to any PC or Web-enabled device.

The service, called Oboe Free, allows a customer to store up to 1,000 songs–about the same capacity as Apple Computer’s 4-gigabyte Nano digital music player. Serious music fans can upgrade to one of MP3tunes’ two premium services for even more storage. For $19.95, MP3tunes offers twice the song capacity as Oboe Free, and for $39.95 a customer receives unlimited storage.

However, the public has yet to show much interest in music lockers or subscription services. Apple’s iPod and iTunes reign supreme in digital music, and everybody else trails far behind.

As competitors continue to search for Apple’s weak spot, they appear to be trying to undercut the company on price. On Tuesday, SpiralFrog announced a deal with record label Universal Music Group to offer songs for free. The start-up is planning to make money by selling ads that will appear as customers download music.

Robertson said another one of Apple’s vulnerabilities is its insistence on locking people’s music into Apple products and services. In an interview last week, he said he sees a day coming when consumers will want to listen on multiple devices such as Web-enabled home entertainment and car-audio systems. As it stands now, iTunes users can’t move their music to devices made by anyone but Apple.

“We want manufactures to play nice together,” said Robertson, who also founded pioneering music site MP3.com, Linspire and SIPphone. “Today they don’t.”

MP3tunes’ software transfers a person’s music library from any device or service, including iTunes, to a music locker. The software even saves playlists.

Gartner analyst Mike McGuire said that the idea of personal-use storage is intriguing because people can grab their music even if they don’t have their listening device handy: Go into any Internet cafe, plug headphones into a PC, and it’s boogie time.

But he sees plenty of challenges confronting the nearly 2-year-old MP3tunes. First, the service thus far has found a small audience among tech-savvy types. To stick a toe into mainstream adoption, McGuire thinks MP3tunes needs to be integrated with another offering “so it’s easier for a consumer to add lockers as a premium part of their music or content service.”

“I could see MP3tunes attracting a service provider who might want to add features as opposed to building them on their own,” McGuire said.

Another hurdle is convincing music labels that the lockers will stay locked, he said. For MP3tunes to distribute music to multiple devices, the songs must be free of any digital rights management software. That means the songs can easily be shared, which could make music executives nervous. Robertson, however, said they needn’t be.

“You can’t really stop this kind of behavior. I mean, people are sharing music right now,” Robertson said. “But it doesn’t do us any good either if a million people share one locker. We have controls in place that tell us when someone else other than the user is downloading music from a locker.”

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The music industry’s educational video about copyright law is full of baloney, according to several trade and public interest groups.

The Consumer Electronics Association and Public Knowledge are among the groups to issue a joint statement condemning some statements on the Recording Industry Association of America’s video, which the RIAA has plans to distribute to the nation’s universities.

The RIAA’s video, a copy of which can be found on its Web site, suggests that students should be skeptical of free content and that it’s always illegal to make a copy of a song, even if it’s just to introduce a friend to a new band, said Robert Schwartz, general counsel for the Home Recording Rights Coalition, one of the groups opposed to the video.

The RIAA has feuded often with groups representing companies, such as CD-burner manufacturers, that have a stake in music sharing. They claim the music industry tramples over the rights of individuals as it fights music piracy. The RIAA has aggressively litigated against people who share music files on the Web for the past several years. The RIAA’s strategy now is to launch a campaign to educate young people of the consequences they face when they download music illegally.

“First, we were told we should not enforce our rights,” said an RIAA representative responding to critics of the video. “Now we are told education is wrong, too. We won’t accept such a do-nothing approach. We’ll continue to work with respected higher-education groups to engage students to think critically about these issues.”

The RIAA says that more than 350 universities have expressed interest in the video.

In the RIAA’s seven-minute video, the narrator attempts to explain copyright law and some of the other hazards with downloading music from the Web, such as being sued or arrested. At one point, the narrator tells viewers it’s okay for them to make a copy for themselves “as long as it’s for you.”

“Making copies for your friends, or giving it to them to copy, or e-mailing it to anyone is just as illegal as free downloading,” the video narrator says.

This appears to contradict a statement made in the Frequently Asked Question section that accompanies the video, Schwartz claims.

An FAQ-section question asks whether someone who has bought music has the right to ever upload or download music. The RIAA’s answer says that it’s okay for productive or scholarly works. The video’s critics say the response makes no mention of allowable uses for home recordings, even for individual use, which the law allows.

“The RIAA seems to be making up the rules instead of citing any consistent interpretation or precedent as to the law,” Schwartz said.

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An analyst report calls La La a savvy new music site for helping people swap CDs via the U.S. Postal Service. But, the report notes, the company is also a highly effective way to pirate music.

La La allows music lovers to find used CDs on the company’s Web site and then order them from their owners, other La La members. The discs are then mailed from one party to the other. What may alarm some music-label executives is that many CDs lack copy protections, and there’s nothing to prevent songs from being converted to MP3 files and spread across the Web, according to a report issued by IDC analyst Susan Kevorkian.

The same is true in the case of brick-and-mortar used-CD stores, but “those stores lack the potential scope of La La,” Kevorkian said in her report. “This perceived threat will only grow as La La’s community does.”

Calls to La La were not returned.

After years of combating piracy, executives from music labels are likely to be wary of any service that promotes sharing, regardless of whether the music is on MP3 or pressed to a CD. People have swapped albums and CDs with friends for decades, but the difference now is that the Internet and PCs make it easy for a and trade with people who have similar musical tastes.

At La La, those ordering a CD pay $1.75 ($1 goes to La La for brokering the swap, and 75 cents covers postage). Once users ship a CD, they’re entitled to order one for themselves, and similar to Netflix, La La provides packing materials. La La’s foundation is the company’s search and recommendation engine, designed to connect members with similar interests in music, Kevorkian wrote.

“La La seeks to re-create online the experience of shopping in a local music store,” said the report, “where casual music-information sharing with other music buffs and knowledgeable salespeople drove sales for the retailer.”

During the dot-com boom days, several companies, including Swaprat and Swap.com attempted to launch bartering services but most didn’t survive the Internet meltdown.

When it comes to mitigating the illegal copying of music, La La is approaching the problem in a new way. First, the company is offering to pay artists 20 percent of the company’s CD-trading revenue through the La La’s Z Foundation. This means that La La will be among the first to cut artists in on profits from the sale of used CDs. And La La also sells new music, which could go a long way toward appeasing record companies.

Finally, with all the illegal distribution of music on the Web, the threat La La poses is insignificant, Kevorkian said. Kevorkian warns record companies to expect some La La users to make unauthorized copies. But the smart play, she says, is to embrace the service.

“The music industry would do better to develop La La as a distribution and marketing channel for new CDs and digital downloads,” Kevorkian wrote.

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When it comes to music, mighty Microsoft is the underdog.

For the company that dominates PC operating systems, desktop software suites and e-mail software and has a darn good business in everything from databases to video games, it’s an unaccustomed label.

Can the latest version of Microsoft’s music software, Windows Media Player 11, be the first in many steps to dropping that underdog tag? While there’s little question that Apple Computer is the company to beat in digital music, technology critics and analysts say Microsoft is starting to get its act together.

Video:
Windows Media Player 11 reviewed

CNET’s Molly Wood shows off the newest version of Microsoft’s digital jukebox.

Last week, a test version of WMP 11, the company’s latest digital jukebox software, was compared favorably by critics to Apple’s iTunes. Technology critic Paul Thurrott, for example, gushed in a review on his Web site that despite being an avid iTunes user, he found himself “drawn to Windows Media Player 11” because it “offers dramatically better performance” than iTunes.

So what’s to like? Industry insiders cheered the close partnerships Microsoft formed with MTV Networks and iRiver.
Redmond helped design Urge, MTV’s new subscription music service, and plans to include it in WMP 11. In addition, Microsoft made sure WMP 11 worked seamlessly inside Clix, iRiver’s digital music player–the first to feature WMP 11?which also hit the market last week.

Many critics say it’s a big improvement over what Microsoft has done in the past, but there’s no question Bill Gates & Co. have a long way to go to catch their decades-old rival in this realm.

Removing the guesswork

Apple has sold more than 50 million iPods and controls 70 percent of the worldwide digital-music market, according to analysts. No doubt, Apple’s innovative designs have had a lot to do with it. So has the simplicity of Apple’s digital music experience. The iPod and the company’s online music store are designed to work together and remove the guesswork for consumers.

The same has not been true, critics argue, for Microsoft and its partners. Because it doesn’t control both ends, Microsoft has not been able to deliver the slick, out-of-the-box experience that Apple has offered.

Of course, tech historians may recall that Apple’s go-it-alone approach to the PC was one of the reasons Microsoft ultimately gained control of the desktop. People initially scoffed at Microsoft’s operating system. But with every new version, it got a little better. Microsoft also partnered with far more PC and software makers and, ultimately, drove Apple into a corner of the market.

But is a stereo the same as a PC? That’s the million-dollar question. While PC users are accustomed to a complex experience (some would say they don’t know any better) people have for decades listened to music on stereo systems that, even at their most complex, are far easier to use than a PC.

For a company to win the digital-music market, say analysts, it needs to duplicate that stereo system simplicity.

“The products by Apple’s rivals only confuse consumers,” said Shaw Wu, a financial analyst with American Technology Research. “The public doesn’t know their names or which device is better from the next. Apple’s approach is pretty simple and straightforward.”

That’s what Microsoft is trying to deal with in WMP 11. Analysts say striking alliances with a select number of music content providers and hardware makers signals that Microsoft is serious about confronting that complexity obstacle.

“That’s the biggest game changer–total collaboration,” said Jason Hirschhorn, MTV’s chief digital officer.

Out of sync in the past

WMP 11 represents the possibility that Microsoft can deliver a streamlined alternative to Apple.

“Vendors and Microsoft were often out of sync in the past,” said Susan Kevorkian, analyst with IDC. “Some devices would only support a la carte song sales and others were subscription compatible only. Now you have a variety of established music services and devices working with Microsoft, and the ecosystem is increasingly straightforward.”

Microsoft execs argue that the game has just begun.

“Remember the digital market represents only 5 percent of the total market,” said Geoff Harris, product unit manager for Windows Media Player. “That means that 95 percent are still buying in traditional means. At the end of the day, this (segment) is still in its infancy.”

Microsoft and partners could draw some of that market by billing itself as a cheaper alternative to Apple, said analysts. Apple declined to comment for this article.

Alissa Paolella, 19, a journalism student at Ohio University, is a big fan of singer Ani DiFranco, but has yet to buy a digital music player. Paolella said she would consider a cheaper alternative to the iPod “because everybody else has one.”

There’s one problem: She doesn’t know the name of a single rival to the iPod and hadn’t heard about last week’s launch of iRiver’s Clix.

Of course, that’s what Microsoft is trying to change. WMP 11 supports subscription services and MTV’s Urge will offer customers two pricing models: They can choose to pay 99 cents per song or subscribe to a monthly all-you-can-eat download service for $9.95 or $14.95.

MTV and Microsoft are billing these subscription services as the most economical way to discover a lot of new music without going broke.

But until someone other than Apple comes up with an easy-to-use music system, don’t expect Apple to lose its grip on the young market.

“If my mom asks me what she should buy, I’m telling her to get an iPod,” said Nitin Gupta, an analyst at The Yankee Group. “My brother is more tech savvy, and he might be interested in doing more than what Apple provides. I might tell him to try one of the new MP3 players.”

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As Microsoft continues to enjoy mostly favorable reviews of its new Windows Media Player 11 jukebox software, analysts say the real boost for the company’s latest foray into music is a partnership with MTV Networks.

As expected, Microsoft officially rolled out a test version of Windows Media Player 11 for XP on Wednesday, two days after the free software could be found in a new digital music player and elsewhere on the Net.

WMP 11 is the latest of Microsoft’s jukebox players. Built into the beta version of WMP 11 is Urge, the subscription digital music store also launched on Wednesday by MTV Networks. On Monday, iRiver released Clix, the company’s latest digital music player and the first device to feature WMP 11. This is all part of a larger plan by Microsoft to challenge Apple Computer’s iTunes music store and iPod digital music player.

While techies were busy offering Microsoft kudos for improving the WMP’s interface, business analysts were counting all the ways Microsoft could benefit from MTV’s marketing prowess.

“MTV has the kind of marketing muscle needed to compete with Apple,” said Nitin Gupta, an analyst with The Yankee Group. “They have all their media properties, from TV to Internet. And they know how to sell music and music-related services.”

Cutting into Apple’s immense lead in the digital music business demands that Microsoft offer consumers more than just superior design and technology, say industry experts. Apple has illustrated an understanding of what kind of devices and services music fans want and how to attach social status to those devices. In other words, the company knows how to market to music fans.

An Apple representative declined to comment for this story.

Microsoft needed an injection of credibility with music fans. For a long time, some have depicted Microsoft as stodgier and more button down than Apple, its chief rival in the music sector. MTV and Microsoft announced their partnership last January, and insiders said then that MTV could help bridge any generation gap that exists between the software company and music buyers.

MTV’s music service, along with Microsoft’s software and WMP 11-enabled devices could be promoted to teenagers and young people on MTV shows such as “Spring Break 2006,” “Date My Mom” or “Pimp My Ride,” analysts said.

MTV’s music expertise will also be a selling point as the network can help guide fans to top new performers. Urge offers a service that lets fans of a group such as U2 automatically receive updates on the band’s most recent music as well as news about groups that produce similar work. Urge users can elect to receive Informer music blogs, written by experts in different genres. Each blog will come with a playlist so readers can simultaneously listen to or download the music they’re reading about, MTV said in a statement.

“Urge distinguishes itself through handcrafted programming, innovative music discovery features and unique integration with Windows Media Player,” said Van Toffler, president of MTV Networks Music.

Meanwhile, to use the beta version of Windows Media Player, Microsoft said, one must have Windows XP service pack 2 installed. Only a 233MHz processor and 64MB of memory are required, though a 1.5GHz machine with 512MB of memory is recommended. Microsoft’s Vista operating system, due to be released next year, will come , the company has said.

The relationship between Microsoft and MTV is not exclusive. Other music services, such as Napster and RealNetworks’ Rhapsody.com, are able to plug in to WMP 11. MTV could also choose to take on additional technology partners.

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