Tesco Digital Challenges Steve Jobs, Apple iTunes

Tesco, the U.K. supermarket chain, said on Tuesday it will open an online shop next month selling music, films, games and television programmes for iPods and other digital players. Digital music sales are growing steadily, fuelled by the immense popularity of portable music players such as iPod.

Currently Tesco’s music download service is only available in Windows Media format, but not for a long time.

Tesco’s download service - ‘Tesco Digital’ - will compete with Apple’s iTunes and will offer a choice of 3.3 million tracks - half of them will be able to be played on any music player in MP3 format, including iPods and most mobile phones. Films and episodes of TV programmes will be added by the end of 2008. This will transform Tesco Digital into the first large retailer to offer tracks to UK consumers without digital rights management (DRM) software. Download prices have yet to be announced.

With the immense success of Apple’s iPod music player and iTunes, some have called for Apple to make its digital rights management (DRM) system ”open” so that music purchased from iTunes can be played on any digital device. But, making music DRM-free is a bit more complicated than it seems. Just over a year ago in February, Apple Inc CEO Steve Jobs slammed the big four music companies for their hypocritical DRM policies:

Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven’t worked, and may never work, to halt music piracy. Though the big four music companies require that all their music sold online be protected with DRMs, these same music companies continue to sell billions of CDs a year which contain completely unprotected music. That’s right! No DRM system was ever developed for the CD, so all the music distributed on CDs can be easily uploaded to the Internet, then (illegally) downloaded and played on any computer or player.

Jobs wondered “…if the music companies are selling over 90 percent of their music DRM-free, what benefits do they get from selling the remaining small percentage of their music encumbered with a DRM system?”

Currently, only EMI’s tracks are available in an unprotected format on iTunes, while Amazon offers over 2 million tracks without DRM - but only to US customers.

Graham Harris, Tesco Commercial Director, said he expected the launch in May to “shake up” the download market and to attract a wider range of consumers. “The new Tesco Digital site is more than a music download portal. We are starting out with a comprehensive music offering, but customers can expect downloadable TV and films as well as games to buy very soon,” he said.

“We are delighted to be offering MP3 downloads for the very first time, and our customers can expect to hear more news in the coming weeks and months as we develop our digital store,” added Harris.