Instead of going against the flow that iTunes has set up over the past few years, RealNetworks' Rhapsody has decided to take a different approach to compete against Apple's leading digital music distribution service - by embracing the iPod's MP3 format. Find out what Rhapsody's new "Music Without Limits" strategy is all about by reading our full article after the jump.

With the high base price of the iPhone and AT&T deciding not to subsidize the cost of the phone, the cost of owning one when it comes out is pretty steep. If for some reason you decided to cancel your subscription early, it gets even more expensive. How expensive? Try an additional US$ 175.

It was recently announced that AT&T has decided to place a US$ 175 fine for those who decide that they want out of the two-year contract with the company. This move has sparked the outrage of many an iPhone fan interested in picking up a unit.

As most would know, when people cancel their subscription to a cellular service they have to pay a fine. The reason for this is because the company sells the phone for a cheaper price and subsidizes the cost over the two years or more as dictated in the contract.

AT&T spokesman Mark Siegel gave word that these termination fees pay for more than phone subsidies. His exact explanation for this is that "there are certain fixed costs we incur in serving every customer who establishes service with us." However, he declined to specify exactly what these costs were.

The Vice President of Jupiter Research in New York Michael Gartenberg spoke about this issue and gave a theory on why this was the case. Considering that other networks do sell music through their wireless service, iTunes will be getting revenue that AT&T could have gotten.

However, he also noted that while this may be the case, those who will be adopting the iPhone are those who will most likely be using more data and voice services, which would give a nice boost to AT&T as well.

Is AT&T trying to milk more money out of this deal? It wouldn't have been so bad if they didn't charge such a huge amount for the cancellation considering the simple fact that you're already paid for the entire phone out of your pocket. I believe it's time for AT&T to decide on having one or the other. If they choose to subsidize it, I doubt many will complain but asking for both is pretty excessive in my book.

As talks between Apple and major music companies ramp up this month, the biggest topic on the floor will no doubt be the issue of DRM-free music. Apple CEO Steve Jobs has long been steadfast on the 99-cent price for a song on iTunes, but now he's willing to go higher in exchange for DRM-free tracks.

"At this point, no one can ignore Apple or what Apple wants, given its position in the marketplace," said Jupiter Research analyst Michael Gartenberg. "The fact that they were able to do this deal with EMI puts more pressure on some of the other labels to follow suit."

According to the San Jose Mercury, at least two major recording companies will ask Jobs to "sell a wider variety of content in digital bundles of songs, videos and other multimedia." This from two recording company executives familiar with their companies' plans. Apple already offers bundled tracks, but the companies hope that expanding these offerings can boost revenue.

Apple may already be aware of the fact that not all the mp3 files that folks listen to on their iPods actually come from iTunes store. It has to be accepted that digital music didn't really alter much of people's buying habits since everyone still checks out filesharing sites to download free music. Others just simply rip the files from a friend's CD.

Jupiter Research reports that on the average, only around20 of the tracks on an iPod were bought via iTunes, and the rest are from the free sources that were mentioned earlier. The report also showed that 83% of iPod users don't buy from iTunes at all, and those who do so only buy single tracks at a frequency of around once a month.

But then again, it doesn't take statistics to tell us that digital music fans still prefer free stuff, digital or otherwise. Despite the success of iTunes, it is inevitable that music files will still come from somewhere else, and this is an issue that Apple can't take for granted and would probably have to eventually come to terms with.

VS

Get ready to rumble!

Last week, Nokia announced that it was buying the digital music site Loudeye, a US firm that is active in Europe through its affiliate OD2. This means competition for Apple, who so far, is the leading name in the music downloading business. According to Nokia, the acquisition will "offer consumers a comprehensive mobile music experience, including devices, applications and the ability to purchase digital music".

Nokia's move is definitely bad news for the fruit company, who initiated a technical revolution with its iPod products. It doesn't help at all, either, to know that Apple incurred the ire of several European governments for monopolizing its propriety technology by creating a software that would limit the iPod's downloading capacities exclusively to iTunes.

Because of this development, Apple may just be forced to work double-time on a new iPhone to fend off the threat. Furthermore, experts believe that the company might have to be forced to offer iTunes to other companies under license. Steve Jobs of Apple has already initiated steps to work with mobile phone manufacturer Motorola, but the results were inconclusive.

But while this turn of events is making Apple break out into cold sweat, this is certainly a boost for Nokia. Mark Mulligan of Jupiter Research explains, "This is all about boosting Nokia's digital music footprint, primarily though not exclusively across mobile."

Oh, but we all need some good competition every once in a while.

Is there an MS iPod Killer or isn't there? That's the question. Recently Reuters cited deep throats close to MS claiming the company has plans of selling its antidote to the iPod epidemic by Christmas. Well, Microsoft said reports of its mysterious MP3 music and video player are based on "speculation and rumours." This despite unnamed music industry execs squealed to the New York Times that they have received briefings about the product.

If such a product exist, the iPod rival is said to have wireless internet capabilities for downloading music without a PC. Why does MS need an iPod Killer in the first place? Nate Elliott, a digital home analyst at Jupiter Research, said it was out of  frustration because "Microsoft... have made no significant headway into Apple's dominance of the market." Elliot added that if MS wants its software to be the dominant music platform it needs to get a product out in the market ASAP. "Microsoft is not a hardware company but they have shown that when they really want to make a success of something they are willing to do it themselves...example is the Xbox."

Elliott also said Microsoft would have a challenge breaking Apple's hold on the market.