Can Tesco topple iTunes?

[Sash]

Doing your supermarket shopping online is about to get a lot more interesting: pint of milk, loaf of bread, tea bags… oh, and the new album from Duffy, the latest episode of your favourite hit television show from the US, and the new James Bond film.

That's because Tesco announced this week that it would be taking on the might of Apple's iTunes music store by launching a new service that will allow people to legally purchase and download songs, albums, films and television shows.

Now, I know what you're thinking: what's the big deal? After all, Tesco has offered music downloads for a while. Well, yes it has. But the songs offered through Tesco Downloads (tescodownloads.com) are crippled with digital rights-management (DRM) software.

This digital encryption is designed to prevent illegal copying and piracy of tracks, but it also severely restricts the way that people can listen to the music they have legally bought. The tracks are only available in the Windows Media format, which means you can't play them on an iPod. That means, for most people, that Tesco Downloads is worse than useless. Conversely, most iTunes songs contain Apple's DRM software, which means the only music players they will work on are iPods.

Tesco's latest venture, Tesco Digital, aims to be much more than a poor man's iTunes; it plans to play Apple at its own game. When the service launches next month, it will offer 3.3 million music tracks for download, of which more than half will be DRM-free MP3 songs, meaning they can be transferred to iPods, mobile phones and a host of other music players.

Tesco is keeping shtoom about which record labels have signed up and will only say that its pricing will be "competitive". However, by positioning itself alongside iTunes in terms of the breadth of content it sells, the supermarket, perhaps more than any other UK retailer, has the best chance of chipping away at Apple's market dominance. The key will be pricing and simplicity of service. With Amazon planning to launch a DRM-free service in Britain by the end of the year, and full-track streaming services such as Last.fm growing in popularity, competition is fierce.

But Tesco has two advantages - familiarity and ubiquity. If the anti-Tesco lobby is to be believed, it seems there is a Tesco superstore in every town. With it come hordes of willing customers. Tesco has invested millions into diversifying its product portfolio, moving away from simply being a bricks-and-mortar, bread-and-milk supermarket to an emporium on a par with Amazon.

Its affluent customer base will be able to earn Clubcard points on all downloads; that's sure to appeal to families suffering the squeeze of the credit crunch. And Tesco's other services, such as its broadband packages, could tie in seamlessly with this service, perhaps by offering users a bundle of music and TV downloads as part of their monthly internet subscriptions.

All music lovers will benefit from this - Tesco's stack-'em-high,-sell-'em-cheap approach could force other retailers to lower their download prices. As Tesco is so fond of telling us, every little helps.

When did you last buy an album off a shop shelf? If the answer is "recently", then chances are that you're over 35. A generation of music lovers is growing up with precious little idea of the joys of cover art and is used to carrying its entire music collection in a pocket. For them, Apple's iTunes service, copying CDs - and illegal downloads - are the only ways to get music.

What's more important is the same generation's fondness for friendly, familiar brands. In a world of farmers' markets, eco-friendly travel and social networking, Apple - a huge US corporation, just like Microsoft - somehow still presents itself as being on the side of the independent-minded music fan.

From a marketing point of view, it's genius, and is bolstered by festivals and fans such as Sir Paul McCartney. But this status is rooted in Apple's products. Consistently innovative, from the influential all-in-one iMac desktop computer to the iPod, Apple's followers still think of the manufacturer as a quirky friend. This irrational association is what Tesco's service will have to fight hardest to crack.

The only way to do that is with ruthless pricing. If Tesco can significantly undercut Apple - and all the other rivals to iTunes - it might have a chance. Realistically, record labels aren't going to allow the supermarket to sell their songs at such a low price. However, with labels like EMI under pressure to increase profits, they need the support of brands like Tesco. But since Apple started selling DRM-free songs through iTunes Plus, it has pre-empted rivals' hopes that they might fill this gap in the market.

On brand loyalty, price and technical issues, Tesco faces an uphill battle. Even if it can build a site with more songs, videos, games and features than iTunes, Tesco will be merely another player in a growing market.

Perhaps the best indicator of Tesco's prospects is its current position. Supermarkets account for significant numbers of CD sales but, as with books, their share is at the popular end of the market. Minette Walters and Girls Aloud may be very grateful for Tesco's help, but I doubt upcoming bands, or hardcore music fans, will notice the difference.

I still like to buy cds to add to my collection, and also so that I can copy them and play them in the car. Most of the cds we do have, I must admit, are simply saved onto Harvs pc and we play them through that.
Not sure tesco can topple itunes as many people are familiar with itunes now, but I'm sure they will have a good try.

[chuckmusic]

I dont know if that can happen. I Tunes is pretty big and in the front of digital media