HOWZAT

BusinessWeek recently suggested that Microsoft was considering launching a branded portable media player, but Mr Gates’s remarks suggest the software giant will concentrate on working with hardware manufacturers and other partners.

Any rival product would have to deal with Apple's formidable lead – the company accounts for around 70 per cent of all legal downloads through iTunes, its online music store, which sells around 3 million songs a day.

Apple sold 14 million iPods during the last quarter of 2005. Apple says it is selling 100 iPods every minute.

But with the market in legal downloads exploding three-fold last year to become worth more than $1 billion, it appears that the largest names in the internet market are preparing to show their mettle.

Reports circulated over the weekend that Amazon and Google are both in talks that could lead to the creation of digital music services.

Google was last month forced to play down speculation it was poised buy Napster, the one-time illegal music website. It has long been thought that the internet search and advertising company would eventually offer online music. The company, which earns the majority of its revenues through internet advertising, is under pressure to show it can leverage its powerful brand in other markets. It already offers video services where customers pay for content.

Google sources have also told Times Online that the company is concentrating heavily on developing digital rights management systems to protect content providers’ copyright. Such work would be a necessary precursor to Google developing its own online music service.

The company has owned the googlemusic.com domain since 2003. However, Google has suggested that it plans to work with partner companies to deliver content, rather than setting up a branded site.

Amazon is though to be even further advanced in talks with music industry players.

Jeff Bezos, Amazon’s chairman and chief executive, said last week that the company’s investment in digital services were "a longer term initiative". He added that he was "excited about the opportunity" digital media offers and suggested Amazon could take a larger share of the digital media market than it currently has of physical sales.

A heavyweight rival to Apple’s iTunes online mobile store would appeal to the major record labels which have suggested that Apple’s one-size-fits all pricing system is dampening demand. However, rival services, such as that developed by Sony, or the website of HMV – run in conjunction with Microsoft – have failed to make any real impression on Apple.

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