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Week in review: Song wars

Music download services crank up the volume, with Yahoo taking aim at market leader iTunes. Also: Xbox 360's coming-out party.

Music download services cranked up the volume this week, with newcomer Yahoo taking aim at market leader iTunes.

The Net giant launched a deep-discount music service in hopes of capturing a slice of the online music market, now dominated by Apple Computer. Yahoo's service is built in large part around a monthly subscription plan similar to those offered by Napster and RealNetworks, which allow customers to put the music onto their portable devices. However, Yahoo is deeply undercutting those rivals' prices, offering initial monthly subscriptions for just $6.99. Napster and RealNetworks both charge close to $15 for their portable subscription plans.

Yahoo also has spent considerable time building links to its other products, such as its popular instant-messaging application, with the aim of making community and legal music-sharing among subscribers a core part of the service.

The new music service is likely to kick off a price war that could put rivals in a painful squeeze.

"It is going to put pressure" on Napster and RealNetworks, said GartnerG2 analyst Mike McGuire. "But it all depends on how long Yahoo can keep running this introductory pricing."

Whatever the outcome, the price war is likely to draw attention to the subscription music model, which has languished in the shadow of Apple's 99-cent iTunes download store.

While Yahoo aims to take a bite out of Apple's music territory, iTunes looks to be morphing into a multimedia download shop. The latest update, which Apple released earlier this week, comes with new features for the music store and updated QuickTime video support, leading to speculation that the update is paving the way for Apple to sell music videos or longer film downloads alongside its singles and album business.

Going mobile
Whatever tricks Apple pulls, Bill Gates isn't likely to be very impressed. Microsoft's chief said in an interview published Thursday that he sees mobile phones overtaking standalone MP3 players and that he views the raging popularity of Apple's iPod player as unsustainable.

"As good as Apple may be, I don't believe the success of the iPod is sustainable in the long run," he said in an interview published in Germany's Frankfurter Allgemeine Zeitung. "If you were to ask me which mobile device will take top place for listening to music, I'd bet on the mobile phone for sure."


Gates made similar comments in an interview with CNET News.com earlier this week.

Gates made those comments as his company wrapped up development of Windows Mobile 5.0, its latest operating system for cell phones and handhelds. Microsoft is hoping to boost its fortunes--and grab some market share from archrival Nokia--by creating software that can more easily be customized by device makers and wireless carriers.

Microsoft points to a number of features it said will help in that regard, including support for software-based buttons that will make it easier to operate devices with one hand and without using a stylus. The new version also offers features such as improved mobile versions of Word and Excel, a viewer for PowerPoint spreadsheets, and a mobile version of Windows Media 10 that supports subscription music and viewing of recorded TV shows.

Meanwhile, cell phone giant Nokia revealed details of its television technology to help jump-start the young mobile-TV industry. The company unveiled its version of a standardized method for delivering broadcast digital TV to handsets in the United States, Europe and Asia. The standard, DVB-H, or Digital Video Broadcast-Handheld, competes with a host of other similar technologies, including Qualcomm's new MediaFlo. Companies supporting DVB-H say it's less expensive and allows a quicker product turnaround.

Nokia's move supports the wireless industry's view that there's a sizable market for mobile-TV fare, including movies, news clips and standard programming typically found on living room TVs. If the market for the content is indeed robust, such a service could generate significant new revenue streams for wireless operators.

Let the games begin
Microsoft has beaten rivals to the starting line with an exhibition of its newest game console. The software giant unveiled the Xbox 360 during a pretaped MTV broadcast Thursday night, edging out Sony and Nintendo to become the first to reveal details of a new console.

Xbox 360 The most anticipated feature among the Xbox 360's specifications is its high-definition picture display. Pricing for the device hasn't been announced yet, but executives have said the console will be shipped in Asia, Europe and North America by the holiday season.

The Xbox 360 will display games in high definition when used with HDTVs, but it will scale down to the best resolution of the television set, Microsoft said. In addition, the redesigned white console will be able to connect to the Xbox Live marketplace using a built-in Ethernet port and broadband Internet access. At the marketplace, gamers will be able to download content such as new game trailers, new game levels, weapons and vehicles for games, and more.

With high-definition graphics, incredibly fast processors and surround sound, the experience will be leaps and bounds beyond anything console gamers have seen before.

However, there are potential consequences to such high-level entertainment on the Xbox and PlayStation consoles. Game developers are worried that the industry will become ever more like Hollywood, with huge budgets, huge productions and lots of sequels, dominated by the few big companies that can afford to produce a top-shelf title.

The consoles are expected to take center stage at next week's Electronic Entertainment Expo, or E3, where trends, and in some cases bets, are set. During the holidays, companies watch to see whether their bets paid off. At this year's E3, slated to run from Monday through next Friday in Los Angeles, all bets will be on new gaming consoles from the big three players--Microsoft, Sony and Nintendo.

"The major console makers are going to lay...the groundwork for the next generation, and all the developers and publishers are going to get, in some cases, their first looks at the new features," said Schelley Olhava, game analyst with research company IDC.

On the Hill
Last-minute attempts by online activists to halt a bill that would create federal electronic ID cards failed this week, when the U.S. Senate unanimously voted to impose a sweeping set of identification requirements on Americans. The so-called Real ID Act now heads to President Bush, who is expected to sign the bill into law this month. Its backers, including the Bush administration, say it's needed to stop illegal immigrants from obtaining drivers' licenses.

If the act's mandates take effect in May 2008, as expected, Americans will be required to obtain federally approved ID cards with "machine readable technology" that abides by Department of Homeland Security specifications. Anyone without such an ID card will be effectively prohibited from traveling by air or Amtrak, opening a bank account, or entering federal buildings.

Congress didn't quite get around to approving an anti-spyware bill last year--it died while awaiting a Senate floor vote. Now members of the Senate Commerce Committee are promising to avoid a repeat of last year's lapse. During a hearing, politicians said spyware was a growing threat that requires prompt action by Congress.

It's not clear, though, how much a new federal law can accomplish. The Can-Spam Act of 2003 hasn't exactly eliminated junk e-mail so far, and both the FTC and the Justice Department say they already have the power to investigate and punish the worst offenders. Also, no U.S. law can hope to reach offshore Web sites.

Congress is also returning to the controversial topic of whether to renew key portions of the Patriot Act. Both the Senate and House of Representatives held hearings that are part of an extended process of reviewing the portions of the 2001 law that are scheduled to expire on Dec. 31. Many of those 16 portions deal with computer and Internet surveillance.

Politicians are nervous about being criticized for a repeat of the process that led to the rapid-fire enactment of the Patriot Act just weeks after the Sept. 11, 2001, terrorist attacks. At the time, members of Congress were required to vote on the legislation without having time to read it in advance, and little debate was permitted.

Also of note
Taiwan's Via Technologies plans to promote PCs that will sell for close to $250 this fall in an attempt to gain ground in the consumer market...Google has stopped allowing downloads of its Web Accelerator software, just days after it began offering the product...A security update for the Firefox open-source browser has been released by the Mozilla Foundation, a move that follows the public disclosure of exploit code for two "extremely critical" vulnerabilities...A Florida regulation that threatened to tax Internet phone networks has been repealed.

Reuters contributed to this report.