Reuters reports today that Nokia Corp. (NYSE: NOK) has signed up Warner Music Group Corp. (NYSE: WMG) to its "Comes with Music" phone service and music store. Nokia is the world's top phone manufacturer and will be making a direct challenge to Apple Inc. (NASDAQ: AAPL)'s iTunes Store, according to numerous reports. The "Comes with Music" service is the first from a phone manufacturer to "push heavily into content" and "differs from other packages on the market as users can keep all the music they have downloaded" while in yearly contracts with Nokia.

WMG executives allowed the music company to join up with Nokia since the service "is the first global initiative to fundamentally align the interests of music companies with telecommunications companies." Nokia already secured the support of fellow music companies Universal Music Group and Sony BMG Music Entertainment in April, and "Comes with Music" launches later this year. Reuters speculates that the agreements with three of the top four music companies (EMI Group has not signed up yet) will "help Nokia attract smaller music companies and challenge the dominant pay-per-track sales model for digital music." Last year, download sales totaled $2.9 billion; if the 146 million Nokia phones had featured "Comes with Music", those sales would have surpassed the digital market.

Record labels have consistently looked for new methods to challenge Apple's grip on the music industry, and subscription models like "Comes with Music" may finally provide that challenge. Subscription models give the music industry more shares per download since users typically are not allowed to keep tracks downloaded during the subscription. "Comes with Music" is betting against that model since users will be allowed to keep music downloaded, and Nokia and the record companies are no doubt hoping that dynamic will keep those consumers renewing contracts with the service. Reportedly, the subscription for "Comes with Music" will only cost $20 per phone, which on a yearly basis would not be too expensive for unlimited downloads.

Everyone in the music distribution business wants to be like Apple (NASDAQ:AAPL) iTunes. No wonder. It has over 80% of the market. Rhapsody, a competing download service, said yesterday that its subscribers could play their music on the iPod. It feels that should improve their customer base. Maybe. But, probably maybe not.

Now, Nokia (NYSE:NOK) has signed up Warner Music (NYSE:WMG) to its mobile phone music service. The big handset company has done deals with three of the four largest record labels.

According to the FT, "Consumers who buy Nokia phones featuring Comes with Music will be allowed to download as many songs as they like from Universal Music, Sony-BMG and Warner for a year." Now Warner is on board.

Getting a piece of the iTunes business will be hard, but Nokia probably has a better chance than anyone else. It sells 40% of the world's handsets, over 400 million a year.

But, consumers are used to getting their music from iTunes. Nokia may have a service, and it may have distribution, but it does not have a music brand or product loyalty in the download subscription business.

The loyalty part is important.

Douglas A. McIntyre is an editor at 247wallst.com.

Conceding that Apple Inc. (NASDAQ: AAPL)'s iPod will be the digital music player of choice for the foreseeable future, online music downloading service Rhapsody is rolling out a $50 million marketing effort to convince iPod users currently using iTunes to make the switch to Rhapsody. Partner sites include Yahoo, Verizon Wireless and iLike, and the downloads will be in the mp3 format so they can be played on iPods.

Rhapsody is a joint venture of Real Networks and Viacom, so it's one of the few online music providers that has the muscle to compete with Apple. But I doubt that they'll be able to. In just a few years, Apple has made itself the biggest seller of music in the country, and sales of music downloads grew about 35% in the most recent quarter, according to the company's 10-Q.

iTunes seems to be pretty entrenched, and I just can't see anything compelling coming from Rhapsody that would motivate anyone to switch from iTunes. Rhapsody vice president Neil Smith told Reuters that "We're no longer competing with iPod. We're embracing it."

But now they're competing with iTunes, and consumers seems to have overwhelmingly embraced that. You really have to question Rhapsody's -- and every other also-ran mp3 seller's -- reason for existing.

Rhapsody, a music download service owned by Real Networks (NASDAQ: RNWK) and Viacom (NYSE: VIA), will make yet another run at Apple Inc.'s (NASDAQ: AAPL) iTunes. According to Reuters, "Digital music seller Rhapsody is launching a $50 million marketing assault on Apple's iTunes, offering songs online and via partners including Yahoo Inc. (NASDAQ: YHOO) and Verizon Wireless."

Why the venture thinks it will have real success is anyone's guess. Downloading to Verizon Wireless phones is not exactly the kind of novelty that is likely to draw customers. The service will have one important new feature, though. Rhapsody subscribers have not been able to play their music on iTunes. Under the new push, that will change.

Memo to Rhapsody: The horse has already left the barn. Keeping the service off of the iPod for so long has helped iTunes move into a unassailable position.

Real Networks, which dominated the multimedia market with its Real Player from the late 1990s until about five years ago, was slaughtered by Apple when it offered a device coupled to a music store with the launch of the iPod.

There is no catching up now. The race is over.

Douglas A. McIntyre is an editor at 247wallst.com.

Billboard reports that Amazon.com (NASDAQ: AMZN) and eMusic will soon offer new pricing schemes in an effort to boost digital music sales. While Apple Inc.'s (NASDAQ: AAPL) iTunes Store retains its popular $0.99 per track price scheme, Amazon.com will offer "Daily Deals" and a "Friday Five" promotion. At the same time, eMusic will be raising prices for new customers, increasing the entry-level plan from $10 to $12 a month, but offering existing customers 10 more downloads per month for the extra $2.

Amazon's "Daily Deals" plan "will feature a new album every day, sold at a discounted price that will vary by title." Billboard cites the current offer with Coldplay in which the band's first three albums offered for $2 in promotion of the band's newest release, Viva la Vida or Death and All His Friends. The "Friday Five" plan "will feature five albums for $5 each" on Fridays.

Both plans come at a time when the music industry has been pushing digital stores to offer variable pricing models, but with Amazon.com the labels exercise the control they really want. Amazon.com's MP3 store operates as little more than an outlet for the labels to sell music and all sales go directly to the label with Amazon.com taking only a small handling fee. Assuming that Amazon.com's new pricing offers are directed from the labels, it's a sign that the music industry is taking another look at what consumers want and how much they are willing to pay.

Billboard reported last Thursday that a federal District Court in Los Angeles has denied a motion by Universal Music Group to find an eBay Inc. (NASDAQ: EBAY) seller who sold promotional CDs the label claims are its property (and thus not eligible for sale) liable for copyright infringement. UMG argued in its motion that a label printed on the discs stating they "were promotional and could not be sold" gives the holders of the CDs the right to listen only and not sell the CDs. According to the BBC, the motion from UMG was first filed against eBay seller Troy Augusto in May 2007 and resulted in the cancellation of an auction and threats from eBay.

The federal court argued that the label could not prevent that sale, and Billboard added that copyright law states "once the legal title to a lawfully made copy of a copyrighted work is transferred, then the person who obtains that copy owns it and may dispose of it." That does not mean an owner of the item can copy and sell the new version for profit ,though. Troy Augusto, the eBay seller targeted by UMG, argued to the court that the recipients of the CDs from UMG could treat the items as gifts under federal law and the court agreed with this assessment.

The yearlong affair between Universal Music Group, Troy Augusto and eBay, brings a larger question into the fold: What is the point of these promotional CDs? Before the advent of the digital market, physical copies distributed to sell new music via the radio made perfect sense, and in many ways they still do because these items are easily played on stations. But, with MP3 files and stores like Apple Inc.'s (NASDAQ: AAPL) iTunes Store leading the way for sales and marketing, could the record industry make promotional MP3s available to both radios and consumers?

According to a Billboard report on Tuesday, Apple Inc. (NASDAQ: AAPL)'s newly introduced iPhone will not feature a new method to download music from iTunes. Instead, users will only be able to "access and download music" from iTunes with the phone's WiFi connection. Luckily, the new 3G phone will allow a better connection to access the store and download music, but Billboard speculates that Apple has not improved the method because the company is "less enthusiastic" about sharing profits from iTunes purchases with the operator, in this case AT&T Mobility, a part of AT&T Inc. (NYSE: T).

AT&T Mobility apparently expanded and constructed much of the 3G network the iPhone will use over the course of the last year, when the iPhone was first being readied for release. The original iPhone worked on AT&T's slower EDGE network and utilized WiFi hotspots, but "the upgrade allows for faster Web surfing from any location in At&T's 3G coverage area." Ideally, using the upgraded network would also provide users with better access and faster downloads.

It's no surprise that Apple would keep the music features on the iPhone the same as on the previous model, since the improvements made to the new iPhone make it much better over the previous model. At the same time, it seems unlikely that record companies would object to this similarity either, since it means they can still seek out new deals and arrangements with the phone carriers outside of Apple (in this case).

Sandisk Corp. (NASDAQ: SNDK), which makes the small and sleek Sansa Portable Music Player, just bought MusicGremlin, a wireless music subscription business. That gives me hope that there is still life outside the cult of Apple Inc.'s (NASDAQ: AAPL) iPod. Sandisk's stock is down about 3% today, which is typical for the buying company.

I did once love my iPod Shuffle, which worked perfectly up until the day it stopped working at all. I made an appointment at the Apple store Genius Bar to try to fix it, reconfirmed before I headed over, then got there to find it would be at least a 90 minute wait. Did the same thing with the same results again, then gave up.

But I'm happy to report that my little Sansa is wonderful.

AC/DC has become the latest veteran music act to join with Wal-Mart Stores, Inc. (NYSE: WMT) to release a new album solely with the retailer, according to the Wall Street Journal. The currently untitled album is expected later in the year and will be the first album of new material from the Australian rockers since 2000, while a tour in support is also expected to follow the new release. Although slated for release solely in Wal-Mart stores, the album is distributed by the band's longtime label Columbia Records, a part of Sony BMG Music Entertainment.

AC/DC follows a number of large selling artists: Garth Brooks, the Eagles, and Journey. The Eagles famously released their first new album in 28 years with Wal-Mart and according to Nielsen Soundscan for Billboard, Long Road Out of Eden has sold almost 3 million copies in the United States. Journey released an album of new material and newly recorded hits last month with Wal-Mart. In addition to this coup from Wal-Mart, AC/DC continues to remain one of the only acts not present in Apple Inc.'s (NASDAQ: AAPL) iTunes Store, the largest music retailer.

The band's music has been available in digital from from Verizon Communications (NYSE: VZ) VCast Music service since March 2007, but only in album form -- a format iTunes does not support. However, AC/DC digital downloads were not available on Verizon phones as full albums were too large. The new album from the band certainly has excellent prospects with Wal-Mart, but an even greater coup for the retailer would be to score the digital catalog for sale on the company's own digital store.

Wal-Mart (NYSE: WMT) is cutting exclusive deals with major artists in a play to improve traffic to its stores and online operations.

According to The New York Times, "Wal-Mart was the largest music retailer in the country last year, so musicians (and their labels) are eager to maintain good relationships, appearing in the special concerts for the chain, which are also open to the public."

But The Wall Street Journal had a much better picture of what is going on. Rock band AC/DC is about to announce a partnership with Wal-Mart in which it will sell its new album only in the largest retailer's stores. The paper writes, "The AC/DC deal, however, comes at a time when the retail giant -- the largest seller of compact discs in the nation -- is signaling it may rock the music world by stocking fewer CDs."

Both papers point out that the deal will hurt music labels that count on CD sales, but neither shows the extent to which Wal-Mart is becoming the unlikely largest competitor to Apple (NASDAQ: AAPL)'s iTunes. AC/DC's music will not be found there.

Media companies can't stand up to Apple, but in an odd twist, the world's largest retailer can.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

Warner Music Group (NYSE: WMG) has asked CBS Corporation's (NYSE: CBS) free on-demand music streaming service Last.fm to remove the label's music from the site "in an apparent dispute over compensation rates." Billboard reports that CBS is "currently negotiating a new agreement with Warner Music Group and are working hard to built the most comprehensive music service on the Web." Music from Universal Music Group, Sony BMG Music Entertainment, EMI Group, and various independent labels remains on Last.fm, and the site's Internet radio service still offers songs from WMG artists.

CBS purchased British-based Last.fm a year ago for $280 million, and WMG was the first major label to sign with Last.fm in February 2007. According to Billboard, WMG had continued to keep music with Last.fm "on a month-to-month basis" after the original deal lapsed. Unlike paid subscription-based services, Last.fm and other free services offer consumers music without charge, and are ad-supported. News Corp.'s (NYSE: NWS) MySpace will soon be starting it's own similar service, which will tap into the social networking site's large user base.

Billboard also reports that WMG had grown "disenchanted with Last.fm's compensation rates" after comparing the rates to other services like the forthcoming MySpace Music. In addition, WMG "owns equity stakes in MySpace Music" and "has been frustrated by Last.fm's failure to proceed with its plans to launch a music subscription service." Paid subscription services have been being pushed by the music labels over other sites and stores like Apple Inc.'s (NASDAQ: AAPL) iTunes Store because they offer better profits for the labels. Mobile phone services have started to tap into this very service, offering consumers music and players on new phones developed for that very purpose.

It is still over a week and a half until Coldplay's fourth album, Viva la Vida or Death and All His Friends, is scheduled for release, but the album leaked online through a torrent Wednesday. The band's first album in just over three years has already proved itself popular with a highly downloaded single and has become the highest pre-sale album ever in Apple Inc.'s (NASDAQ: AAPL) iTunes Store, according to NME.

Prefix magazine speculates that the album's leak has raised serious issues for the band's label, privately-held EMI. Prefix reports that the albums second single, title track "Viva la Vida" has seen 510,000 downloads already, not as impressive as the two million its predecessor "Violet Hill" moved. The magazine also speculates that the leak will make it "unlikely that the album will be the rousing success that EMI had hoped." This just seems to disregard the consumer base and the band's large fanbase.

Arguably, the 510,000 downloads of "Viva la Vida" should be interpreted as that many presale downloads for the album, since the single and album pre-order are bundled together in iTunes. If that is the case, first week sales will be an impressive, rousing success. Coldplay and EMI have taken the next logical, and predictable, step to combat the online leak. NME reports that starting tonight the album will be available for streaming from the band's MySpace page.

Fresh off the heels of a successful mini-tour of the United States, Radiohead's former label, privately-held EMI Group, has released a new greatest hits album and made the band's back catalog available on Apple Inc.'s (NASDAQ: AAPL) iTunes Store. British-based download retailer 7digital first scored Radiohead's back catalog last September but was only able to sell the music as album-based downloads, but without the anti-piracy technology digital rights management. iTunes will offer DRM-free files, but also individual track downloads in addition to album-based purchases.

The back catalog's availability on iTunes follows the band acclaimed seventh, non-EMI released album, In Rainbows, by about five months. According to Billboard, "Radiohead had been holding out because of its desire for fans to buy the albums in complete form, rather than as individual tracks." Billboard also quotes unnamed sources that claim "iTunes always had the option of selling Radiohead's back catalog in album-bundled form, but did not do so, in keeping with the fact that the overwhelming majority of artists sell their music as individual track downloads on the service."

Billboard calls iTunes practice of offering individual track downloads over album-bundled forms "a smart one from a financial standpoint." Digital sales of In Rainbows accounted for 106,000 of its 526,000 copies sold. It is also a good one for the industry since single track downloads have grown in popularity and make it easy for listeners to choose what they want to hear from artists. Even though Radiohead tracks are available as individual track downloads now, it would be unsurprising if the albums did not also witness nice sales from new and old listeners.

The CD single is dead. At least that is what British supermarket giant Woolworths Group plc (LSE: WLW) is predicting as the company drops the format due to declining sales and with hopes of creating a download store. The chain will remove CD singles from shelves starting in August, but will retain the format for one-off releases like the British TV show X Factor, similar to American Idol in the United States.

Billboard reports that this move could end the use of CD singles across Britain altogether, but figures for CD singles sold versus digital downloaded single tracks were not made available. Woolworths stores sold 25.5% of singles in 2006, while the format has dropped from 55 million units sold in 2000 to just eight million last year.

Billboard reports that the next version of Apple Inc.'s (NASDAQ: AAPL) iPhone may feature a new wireless internet connection and offer more tracks as ringtones than are currently available. Potential ringtones are currently limited to about 500,000 tracks, but the new plan will increase that number and extend the feature to ringback tones as well. Of course, this assumes that Apple and the record labels can build a decent relationship.

Apparently, Apple and the record labels are in dispute over how much the iTunes Store will charge users to download tracks via a wireless iPhone connection, for ringtone use or not. Billboard cites a New York Times article that claims "labels charge more for mobile music downloads than they do downloads via a computer, and apparently there's still some back and forth over that issue." The wireless connection currently offered is a slower version than the 3G access that projected for the new iPhone, opening new locations and a "broader range of access."