Apple should let Harmony be

As most everyone looking already knows, Real announced technology called Harmony that allows songs, 192 kbps DRM, bought on their music store to be converted into Apple AAC Fairplay and played on iPods. (Note: This is only true on Windows, Mac users still only get iTunes) Apple responds by calling Real hackers and threatening to break the AAC songs on any iPod sourced from Real. Real counters with we are not hackers, this is perfectly legal reverse engineering, and you can't make us stop. I have no particular compulsion to buy songs from a store other than the iTunes Music Store (iTMS), but Apple should just work out a licensing deal with Real to make money off of this and let it be Why should Apple agree to lose sales on iTMS? The simple view is that Apple allows a duopoly market for legal downloads that work on the iPod to exist. Apple works out a licensing deal with Real, which will be happy to agree to something like this to stave off the potential lawsuit. This could greatly help Apple in the coming battle with MS over music stores. The criticism that you only have one store to buy music from with Apple, with MS you have x, mostly goes away. The old adage the enemy of my enemy is my friend applies here. Apple should seriously consider this point above all others when ordering priorities. That said, there are a number of potential business reasons Apple might have for locking out Real. First is they are trying to keep as many eyeballs glued to iTMS because they squeak out a tiny profit. I don't think this a great defense, the margins are on the iPods not iTunes song sales. Another reason Apple locks out Real is because they are planning on reselling, just like Real plans to with Harmony, their music store technology to other parties to generate another revenue stream. This is a lot more intrigueing. If Apple endorses Real, they immediately have a competitor in this upcoming market. A competitor here they are probably willing to live with, but giving that competitor a very strong bonus, compatability with the most popular portable music player in the iPod, that Apple was counting on to drive sales of it's packaged music store software, probably seems onerous to Apple. With Real's Harmony technology, they can target not just the iPod with AAC Fairplay, but any Windows Media DRM device as well. On a more fundamental level, if Apple endorses Harmony, the winning format could be not AAC, not WMA, but Real. If you buy everything off of the Real store in Real's format, but they convert to everything else with no lose in quality, from a consumer standpoint why not go with Real because they just solved the format becoming a Betamax problem. AAC and WMA, before the market really even gets rolling, have been commoditized to just another format. An analogy is HTML applications running on Linux, Mac, or Windows. The OSes are commoditized because they all run HTML equally well. Why target a format which limits your reach when you can reach every music device with the Real format and Harmony? Again these are business decisions for Apple to mull over. As a consumer, the prospect of another music store that supports the iPod is enticing because competition always breeds better prices and products in the end.