According to recent reports, however, Spotify may do things a little differently when it reaches the States. Says Andres Sehr, Spotify's global community manager, the company is considering going the "freemium" route for the U.S. market.

"Freemium" is a word coined to describe a business model where basic services are free while special or advanced features are available for a fee. That's a slightly different spin on the business model Spotify uses today. Currently, Spotify offers its European users a choice between a free, ad-supported application and a paid app which costs around about €10 (around $16.60) a month. With a Spotify "freemium" service, however, there would be just the one application in which users would pay for the extra features they want to use. Details on how exactly this would work and what features would come at additional cost is still unknown. Sehr says it's far too early say at this point. Also unknown is whether this "freemium" model would forgo the monthly subscription fees in favor of the premium upgrades.

In an interview published today in the Wall Street Journal, Sehr explained why the company is considering making this sort of change. "The U.S. is a completely different market, and the competition landscape's different," he said, adding that "when we launch there, it'll definitely be a challenge for us."

What Sehr is referring to is the particularly crowded market here in the U.S. where services like Imeem, Pandora, Last.fm, and many others are already well-known and popular destinations for streaming music online. In other words, Spotify isn't just rivaling iTunes in the U.S., it's going up against a number of other companies doing nearly the same thing, too.

Spotify on the Mobile

Where Spotify has an edge over its competition is on the mobile front. Although there are plenty of streaming music applications available for both the iPhone and Android platforms, Spotify's app does things a little differently...and considering the glowing reviews, better. Instead of simply providing a streaming radio of sorts based on a user's musical preferences, Spotify's mobile users can actually pick and choose the songs they want to listen to and build a custom playlist. That playlist can also be streamed when the mobile device is offline thanks to Spotify's caching technology.

For this reason, there were originally concerns that Apple would reject the streaming music app because selecting tracks, making playlists, and playing music offline puts it in direct competition with iTunes itself. Those concerns were soon discovered to be unfounded as Apple recently approved the app for distribution via App Store - a decision no doubt influenced at least in part by FCC scrutiny over the company's app approval process and anti-competitive tactics.

While the initial launch of the Spotify mobile iPhone/iPod Touch app is only in the European counties where Spotify is currently licensed, the Apple "seal of approval" means that (in theory), Spotify won't have any trouble making it into the American App Store, too. That is, once they get the American licensing agreements worked out.

Although the company already has European deals with Universal, Sony, Warner, and EMI and it solidified an American licensing agreement with the Independent Online Distribution Alliance (IODA) in July, its the Stateside licensing agreements that are holding up the service's U.S. launch. Still, the company remains optimistic and expects to make its American debut later this year or in early 2010.

Greenwood's biggest complaint about MP3s was not quality or sound compression, but rather abundance. He suggests that MP3s make it far too easy for fans to hoard music without "giving it their full attention". In a recent Pitchfork article Eric Harvey suggests the opposite. Says Harvey, "The mp3 may have atomized music into millions of little pieces, but each piece, it seems, found a publicist. The average music fan now has the built-in capacity to double as promoter and distributor in an ever-expanding arena that's making and eliminating rules every minute."

Whether you see them as hoarders or promoters, one thing is certain, the iPod generation is changing how music is consumed. But if they can't depend on tiered pricing for audio quality, how can companies monetize the new music fan? While a Stanford study suggests that the iPod generation prefers the flat sound of an MP3, it doesn't mean today's listeners aren't willing to pay for their music. According to an NPD Group report purchasers of digital music downloads increased by 29% last year with iTunes controlling a quarter of all music sold. Some of the ways fans still generate revenue for bands include streaming music subscriptions, track and album purchases, concerts tickets, merchandise and paid application downloads.

Update, Ed: there can be a big difference in audio quality of MP3s promoted on the Web. For example the quality varied greatly between Radiohead's In Rainbows album and Saul Williams' album (promoted by Trent Reznor). See Kim Gaskins' post on the new Latitude Research blog Life Connected for further analysis.

Photos taken from Dead Air Space

Unlike other mobile streaming music applications, the Android and iPhone applications allow members to cache streaming files for offline listening. In other words, there is no need to download a file for listening. It's an amazing mobile feature for users, but as a free application it would cannibalize Spotify's revenue stream from downloads. However, with the subscription requirement, the company is destined to make money from both downloads and streaming lists.

If the application doesn't make it into the App Store, Spotify has other opportunities to generate revenue with downloads. Ek announced plans in late June to launch a one-click download solution for easier on-site purchases. The company's ability to gain referral sales revenue shows potential, but the access model is less attractive than subscriptions. Spotify could offer a tiered file pricing system without compromising its existing service. The company could continue to stream compressed files for free while offering higher-quality files or rare releases for purchase and download. This option might appeal to diehard music fans, but it certainly doesn't have the cool factor of the mobile applications.

Regardless of Spotify's revenue streams, the company's US release is widely anticipated. Americans are eager to see what UK and Swedish audiences have been raving about. Some of the company's latest 3rd party tools look like amazing additions to the community. Spotify's blog featured the following:

1. SpotifiTunes: Independent web developer Phil Nash's iTunes playlist tool allows you to upload your iTunes library and generate additional links to your favorite artists in Spotify. Members can discover new album releases and sometimes surprising band collaborations from the past.

2. We Are Hunted: The curated We Are Hunted music community created a Spotify playlist complete with the site's top tracks and artists. Once users can cache this on their devices, they'll have the ability to listen to the community's 99 hottest streaming songs in offline mode.

3. Share My Playlists: This site contains almost 4000 pre-compiled Spotify playlists for your listening pleasure. The service offers amazing potential to leverage the popularity of existing celebrity deejays, music bloggers, labels and music properties. Just think about the range this service could offer. From indie electronic labels to Motown, if brands were to release weekly tribute playlists you can bet there would be listeners.

After this sort of a build up for the North American launch, it would be a let down if American audiences thought the service was anything short of fantastic. We won't have to wait long for a reaction, the release is expected before the end of summer.

Could this mean live streaming is coming to our iPhones?

The Playlists will be Extended M3U Playlist files, a standard playlist file format originally implemented by the Winamp player. These M3U files are plain text documents that contain the location of the media files that should be played. Originally, M3U files only supported audio playlists, but over the years they came to support video as well.

In the new specification, the M3U Playlist will extend the standard file format by defining additional tags called EXTM3U and EXTINF. The first of those two simply designates this playlist file as an extended M3U file and the second, EXTINF, is the record marker that describes the media file identified by the URI that follows it in the following format:

   #EXTINF:<duration>,<title>

The document then goes on to describe how this new specification should operate in more detail - you can read it in its entirety here.

The big question is, what does this really mean? Is a future version of iTunes going to support streaming music and video from our PCs to our iPhones and iPods, or will we be streaming directly from an Apple server instead? Either way, having that option could free up our disk space considerably on our devices - perhaps so there's more room for apps?

Perhaps it's in preparation for the upcoming camcorder functionality rumored to be coming in the next gen iPhone. Once people start saving video files to their hard drives, those disks could fill up fast. Why not make some room by letting us stream our media instead?

Then again, maybe Apple just felt it was time to take advantage of cloud computing and stop limiting how much we carry with us based on iPhone/iPod disk size and the size of our PC hard drives. If so, that would be a fantastic feature. This author knows from personal experience that, in our household, we recently purchased all five seasons of a particular hour-long TV show and lost 30 some GBs on our PC's hard drive in the process. Being able to stream instead of download, in this case, would have been a huge benefit.

A final theory is that Apple is simply getting the jump on Microsoft, who proposed a similar adaptive video stream a year ago called Smooth Streaming but didn't submit it to IETF to make it an RFC.

We don't know how live streaming is going to be put into use right now - we can only theorize. All we know is that it's been developed so we're hoping we'll find out sooner or later. Take a gander at the spec yourself and share your theories with us in the comments section below.

According to Newsweek, both the iPod Touch and to a lesser degree the iPhone are increasingly being used by the U.S. military because of their versatility, ease of use and comparative low cost.

Software developers and the U.S. Department of Defense are busy developing military software for iPods in an attempt to gives soldiers even more functionality. A new program called Vcommunicator produces spoken and written translations of Arabic, Kurdish and two Afghan languages.

"Snipers in Iraq and Afghanistan now use a "ballistics calculator" called BulletFlight, made by the Florida firm Knight's Armament for the iPod Touch and iPhone. Army researchers are developing applications to turn an iPod into a remote control for a bomb-disposal robot (tilting the iPod steers the robot). In Sudan, American military observers are using iPods to learn the appropriate etiquette for interacting with tribal leaders," the report says.

According to an Army official in Baghdad, the devices have yet to be successfully hacked and at $230 a pop, the iPod may fit right into President Obama's 663.7 billion dollar defense budget.

Half the students (32 of 64) skipped the class and listened to the podcast only. The other half attended in person, where they also received a printed handout. A week later, the students were tested on the material.

Podcast Listeners Did Better

The students who downloaded the podcast alone averaged a C (71 out of 100) but those who attended class averaged a D. And those who listened to the podcast and took notes did even better - their average was 77.

Before university classrooms empty out, it's important to note that this is only preliminary research. McKinney's study involved only a single lecture. Also, motivation may have come into play as well. Her experiment didn't count for class credit, so students were encouraged to participate with iTunes gift cards. The high scorer from each group was awarded a $15 gift certificate for use in the online store.

McKinney now plans to further study podcasts in the classroom over the course of an entire semester, instead of just one class. She wonders if students might find podcasts more useful early on in a class, when the material is still new. Still, McKinney is a big believer in the power of technology and its impact on education. "I do think it's a tool," she says. "I think that these kids are programmed differently than kids 20 years ago."

Just looking at the smartphone market, Apple also continues to solidify its dominance. In America, the iPhone now accounts for 48% of all traffic to Admob's network, which is more than RIM (19%), Palm (9%), and Windows Mobile (15%) combined.

It's All About Usability

As we pointed out last month, Apple has created a user-experience that makes its users want to use the mobile web on its devices. It is probably safe to assume that most iPod touch users could easily have used their desktops or laptops to access the web instead, but for quickly looking up the news or reading email, the instant-on experience of a phone is often preferable over the more fully featured desktop experience.

When we looked at Songbird in the past, many readers were quick to point out the player's sluggish experience, tendency to crash, and bugs. Whatever negative experiences you had before that drove you away from the software, now is the time to get it another shot.

This time around, the player felt fast, lightweight, and stable. It imported our iTunes library without a hitch, even the DRM-protected purchases and the accompanying metadata.

As we played tracks, an add-on called mashTape, one of the six default add-ons, let us delve into artist info, discography, links, news, and scroll through flickr photos and YouTube videos. Others that ship with the player out of the box include Last.fm, Concerts, and SHOUTcast radio.  With these installed, you can sync your tracks to Last.fm's online service, check out upcoming concerts in the area, and stream music over the internet using the player.

In addition, there are over 70 add-ons available for download from the Songbird site, including the recommended add-ons like LyricMaster, which puts the lyrics to your favorite tunes in the Songbird sidebar and MediaFlow which introduces a visually appealing cover flow view of your music.

Songbird is based on Mozilla's Gecko engine, the same engine that powers Firefox. And like Firefox, Songbird also allows for tabbed browsing and themes, as well as the above-mentioned add-ons. The customization and extendibility Songbird provides are really what make the software so compelling.

What's Missing

Of course, in pointing out Songbird's strengths, we would be remiss if we left out its weaknesses, too. Major features found in iTunes are still missing from the 1.0 release. Songbird can't automatically download album art, watch folders, offer feed management, or rip CDs. The roadmap promises these features are coming as is broader video support. However, considering it took the company two years to get to this point, some people may have trouble believing the promised February and April 2009 dates the roadmap lists.

For iPhone and iPod Touch users, iTunes will still be necessary as only iTunes allows for syncing those devices and the installation of apps. Even iPod users have reason to worry that Songbird will break at some point given Apple's tendency to shut down attempts to reverse-engineer their software.  

Why Apple Should Be Scared

Focusing solely on the missing features that make Songbird feel incomplete is near-sighted to say the least. Fast-forward to next year and you'll have a lot less to complain about. Remember, too, that the web browser you know and love as Firefox 3 didn't start off complete with an awesome bar, integrated add-on installer system, and full-page zoom, either.

What Songbird delivers is something Apple can't: a more open version of iTunes that runs on PC, Mac, and Linux machines. Apple's locked-down and closed iTunes player lets Songbird comfortably find its niche as the open, alternative music player, much as Firefox became the alternative web browser.  If the company ever reaches the point where it can match every one of iTunes features and provide the customization aspect, the decision to switch will become a no-brainer. Why have less when you can have more?

Today's Songbird is no iTunes killer...at least not at the moment. We're just not there yet - maybe we'll never be - but we're definitely enjoying watching the company give it a try.

Evernote

The newest version of the popular Evernote note-taking app introduced one of the most requested features: offline notes. Through a new button called "favorites," you can mark notes for offline access. If you have Evernote on your iPhone already (who doesn't?), then check the app store for updates because this one is a must-have. Evernote newbies can just download the app now.

Stanza

The Stanza ebook reader lets you port reading material from your computer to your iPhone wirelessly so you can take your books with you when you're out and about. Once loading up with books, you can read them anytime, whether or not you have an internet connection. Download Stanza here. (Another option is Readdle, or check out our previous article for even more ebook readers.)

Instapaper

The Instapaper bookmarking tool for iPhone lets you bookmark web pages for offline reading. As any iPod Touch user knows, mobile Safari's tendency to auto-refresh pages means you can't open up web pages and save them for later reading offline. You could also choose to buy the Pro version for $9.99 which uncaps that limit while also adding other features like tilt scrolling and an adjustable text size. Download here.

Encyclopedia

The Encyclopedia app from Steam Heavy Industries delivers a complete copy of Wikipedia to your iPhone/iPod Touch for offline access. By complete they mean the complete article text, but not references, image descriptions, user profiles, etc. Being warned, though, this app needs quite a bit of storage space: 2 GB. Download here.

NYTimes

The NYTimes iPhone app lets you read the news from the New York Times right on your iPhone. You can navigate through the stories quickly, select up to four favorite sections for one-touch access, choose to browse by photos which link to the stories upon touch, and, of course, read the news offline.

MiGhtyDocs

The MiGhtyDocs iPhone application takes your Google documents offline for access anywhere. You can't edit them and save your changes, but at least you can get to them. Currently, only text documents and spreadsheets are supported. No word on slideshows yet.

An RSS Reader

There are actually quite a few RSS readers available from the iTunes App store, many which sync with your Google Reader for offline access. However, this author's personal favorite is Byline, a $2.99 app which offers a 2-way sync with Google Reader. You can even star, share, add notes, and email your RSS feeds, just like in Google Reader itself. To really juice it up with tons of feeds for an extended period of offline time, go into your Settings app and configure it to archive 200 items instead of its default limit.

Some things we didn't see:

• new iPod Shuffle
• push notification for iPhone
• one more thing...

TV Shows

With regards to TV shows on iTunes, Apple announced the availability of a select number of shows in HD, including Monk, The Office, and Heroes. Apple also announced the return of NBC to the iTunes store.

iTunes 8

The user interface of iTunes 8 only received minor cosmetic updates such as a flat album cover view and one-click automated playlist creation. The major addition to iTunes is the 'Genius' feature, that will make buying recommendation and suggest playlists based on your buying behavior and the music already in your library.

Apple also announced that iTunes will start sending data about the songs you listen to and your music preferences back to Apple. This is an opt-in service and, according to Jobs, completely anonymous, but privacy advocates are surely going to take a very close look at this.

iPods

Classic: The iPod Classic has been cut down to one model with 120GB. According to Jobs, most users only considered the 80GB model anyway.

Nano: The Nano received a major design overhaul, with a curved glass front and a larger screen and a built-in accelerometer. The UI for the Nano is now similar to that of the iPhone/iPod touch.

One nifty new feature: Thanks to the accelerometer, you can now just shake your nano and it will automatically go into shuffle mode.

The nano can now play 24h of music and 4h of video.

The new nano will cost $149 for 8GB and $199 for 16GB and should ship in the next few days. It's available in a whole rainbow of colors:blue, purple, orange, green, and pink.

It also looks as if the new headphones for the iPod's have microphones, though it is not immediately clear why. We assume that all the iPods now have voice recording built-in by default.

Ipod Touch: Apple also introduced a new iPod touch, which keeps the same design as the old one, but is a bit thinner and has a stainless steel rim with integrated volume controls on the side (hey - I want that for the iPhone as well!) and built-in speakers.

Nike+ now comes standard with the iPod touch, though you would still need a transmitter for your shoes.

According to Apple, the iPod touch can play 36hrs of music and 6hrs of video and the price points are: 8GB, $229, 16GB for $299, and a 32GB for $399.

App Store

According to Jobs, 100 million apps have been downloaded from the store in only 60 days.

Games: Apple is clearly trying to push the iPod/iPhone as a mobile gaming platform. Jobs stressed that there are now over 700 games available for the iPhone/iPod touch platform. To drive this point home, Phil Schiller demoed Spore Origins for the iPod (our review of Spore for the PC was mostly negative, but the iPhone game has gotten rave reviews so far). Phil also demoed 'Real Soccer 2009' and 'Need for Speed,' which both look like they are very good games as well.

2.1 Firmware

The updated firmware is available for the iPod touch for $9.99.

For the iPhone, Apple promises that this updated fixes the problems with dropped calls and crashes in Safari and other applications that have plagued the phone from the beginning. iPhone users can also expect better battery life, though Jobs did not go into any specifics. Apple also promises that backups will now be considerably faster (right now, some users are experiencing backups that can take hours).

The update will be available on Friday.

Summary

Overall, this was a bit of a lackluster event. While the updates to iTunes and the 'Genius' feature are interesting, the updates to the iPod line were, at best, incremental. The new look of the iPod nano is nice (though surely some will complain about it as well), but also nothing too revolutionary. Apple, of course, is in a hard spot, where it is constantly expected to surprise us. This event didn't hold many surprises, especially because 90% of the news had already leaked before the even even started.

One thing that did surprise us was that Apple did not make any announcements about the availability of push notifications for the iPhone in the next release of the firmware. It could still be part of the update, but so far, there is no indication that this will indeed be the case.

And thanks to a new application from Simplify Media, you can now even access all that music from your desktop while on the road.

Simplify Media does something Apple should have built into the iTunes Remote already: it allows you to stream the music in your iTunes or Winamp library right to your phone or iPod touch, no matter whether you are on your home wifi network or the cell network. The interface is very similar to that of the regular iPod application, but adds some nice touches to it, including automatically downloaded lyrics and artist bios.

In order to use Simplify Media, you have to first install a small application on the machine that hosts your music and set up an account with Simplify Media. The application is available for Windows, Mac, and Linux and installing it is extremely easy. As a bonus, you can also share your music library with up to 30 of your friends and family members.

We mostly tested the application over AT&T's 3G network, where songs started within seconds. Our tests on the EDGE network were also successful, but it just takes a bit more patience as you have to wait for the buffer to fill up just a bit longer.

Simplify Media is available for free for the first 100,000 users and will cost $3.99 after that. As of now, the app is still available for free on iTunes.

2) Pandora (iTunes link)

The music discovery service Pandora has been a long-time favorite here at RWW. Pandora, if you are not already familiar with it, lets you create your own radio station, based on songs or artists you like. As you listen to more songs, you can vote them up or down, which allows Pandora to calibrate itself to your music tastes. If you like a particular song, Pandora gives you the option to directly buy it from iTunes, or to bookmark the song so you can buy it later on.

Pandora's iPhone interface is similar to that of its web interface and, like most of the music apps listed here, is somewhat reminiscent of Apple's own iPod app.

One thing we noticed was that there is a trade-off between sound quality and network speed. If you are on a wifi network, you get a high bitrate and stereo sound, but if you are on a cell network (even 3G), the bitrate is adjusted to only 64kbps and the sounds is only available mono, which can sounds a bit tinny, but is still quite acceptable while you're driving in a car.

Overall, we love the Pandora application because it has allowed us to discover more new music than any radio station ever would.

3) Last.fm (iTunes link)

Last.fm is somewhat similar to Pandora, but it has more social aspects built into the app. You can, for example, play stations from your friends on Last.fm. The Last.fm application also displays any upcoming concerts by the band that is currently playing.

One limitation of the Last.fm iPhone application is that it can't look at your favorite music on your iPod and make recommendations based on this ('scrobbling'), which has always been one of the main selling-points of Last.fm on the desktop. This is probably due to the limitations of the iPhone SDK and won't feel like much of a limitation to new Last.fm users, but if you are used to this functionality, using the iPhone app will feel limited.

Once you are logged into the app, you can listen to songs you can listen to recommended songs you have already scrobbled on your desktop, listen to your friend's recommendation, or start a new station altogether. If you like a particular song, you can immediately buy it on iTunes.

Last.fm offers a higher audio quality than Pandora, but the price of this is that we experienced longer delays and more drop-outs when streaming over the 3G or EDGE network.

4) AOL Radio (iTunes link)

The AOL Radio application lets you listen to online radio stations, though the selection is mostly limited to CBS owned stations and AOL's own special interest stations (think 'All German Folk Music 24/7'). While it might seem backwards to want to listen to radio on the iPhone given that you have so many other options, a lot of the specialty AOL stations are actually quite good. There is also a nice selection of talk radio stations available, including one called 'Psychic Radio' (their motto is 'We Know You are Listening...").

The application organizes stations by location (and it can use the built in GPS of the iPhone to find your own local stations) or music genre. If you like a particular song, you can, as will all the other apps, buy it on iTunes, or bookmark it, though you can't really do anything with those bookmarks besides buying the song later on.

One restriction of AOL Radio is that some stations are only available while you are on a wifi network and there is no way of telling which stations have this restriction and which don't/

5) Tuner Internet Radio (iTunes link)

If you want more Internet radio stations and the ability to add your own streams, Tuner Internet Radio is for you, but you will also have to pay $5.99 for the privilege. While it is overall quite similar to AOL Radio, you get a lot more options and even a built in OpenGL based visualizer. One area where Tuner Internet Radio shines is in its selection of international stations. While AOL Radio mostly features CBS stations, Tuner Internet Radio also features BBC and PBS stations, among many others.

Tuner Internet Radio can play any AAC+, MP3, PLS, and M3U stream, but note that it does not support RealPlayer or Windows Media stream, which might be quite a limitation if your favorite Internet stations use these formats.

Whether buying this is worth the $5.99 is a personal decision, but if you don't mind the price, Tuner Internet Radio is, in our view, a better application than AOL Radio.

In the following poll, we've included each of Josh's predictions - and also added some more from RWW commenters.

Steve Jobs photo credit: dfarber

Last year it was the iPhone, two years ago it was the Intel iMac, the year before that the iPod shuffle and the Mac mini. While clearly, not every year is as exciting as the last, Apple always has something in store for us. History would suggest that this year's announcement won't be as earth shattering as the iPhone last year, but one never really knows what the Great and Mysterious Jobs has planned.

An interesting sidenote: I am perhaps the only ReadWriteWeb author who isn't a regular Mac user. But if prediction number 1 pans out, then I see that changing very quickly.

1. An Apple subnotebook - This one has been kicking about for years. The rumor is that Apple will announce some sort of subnotebook (think: 10.4" screen or smaller) that has no optical drive, a solid state drive, and maybe even a multi-touch screen. What lends more credence to the rumor this year, perhaps, is that the market for these small devices is heating up. The Asus EEE PC is flying off shelves and Everex is planning the release of a subnotebook based on the Via NanoBook reference design (Packard Bell is the NanoBook OEM for Europe). As hot as UMPCs are, and even though CNBC claims they're already in production (though, they say it will have a 12" display, which I really don't consider a subnotebook), this one still seems kind of unlikely. I hope I'm wrong, but 45% probability.

2. 3G iPhone announcement - AT&T's CEO says it is coming in 2008, and a 3G iPhone is a no-brainer. It will help Apple meet their initial sales goal of 10 million units by the end of 2008. 60% probability.

3. iPhone 2 - The reason they don't already have a 3G iPhone, according to Steve Jobs, is that battery technology isn't good enough to support it. So if you're going to release a 3G iPhone with a new battery, why not just announce the second version of the thing? The iPhone 2 would have more memory, an improved camera, and built in support for third party apps. These are all things that seem likely in future iterations of the iPhone, so if the 3G iPhone is coming, I think other improvements are likely. 60% probability.

3a. New iPods - As long as we're getting a new iPhone, we might as well get new ipods, right? Well, the iPod product line was just updated in September, so it is unlikely that it will be again so soon. But if there is an iPhone with a larger flash drive on the way, expect the iPod Touch to get the same treatment. A 128 GB SSD iPod Touch would rock. 30% probability.

Mac subnotebook concept image via MacRumors.com.

4. News about iPhone SDK - When the iPhone arrived, Stave Jobs said the Internet was its SDK. That certainly drove the creation of a lot of mobile web apps for the iPhone, and was a smart way to promote the iPhone's great Internet browsing capabilities, but it wasn't enough for many users. That's why Apple is planning a real SDK for the iPhone for February. With Google's Android on the horizon and Yahoo! today announcing an open mobile widget platform, the time seems right for the iPhone SDK. This one isn't really a rumor, so 100% probability that we hear about it at Macworld.

5. iTunes movie rentals - This one also isn't really a rumor. The New York Times sort of confirmed it two weeks ago and we've been hearing about Apple cutting deals with studios for 24-rental downloads via iTunes for weeks now. With Netflix planning a set top box of their own, it makes sense for Apple to bring rentals to iTunes (and Apple TV). This one is 100% probability - all that's left is the details.

6. The future of DRM - DRM is dead, but Apple wasn't invited to the party. Of the 4 major labels that have announced plans to sell DRM-free music, only one (EMI) is doing so with Apple. Universal and Warner are dealing with Amazon right now, and Sony BMG is being whacky and selling their DRM-free download in stores (yeah, I don't get it either). So who knows what the future of DRM at Apple is, but you can bet Jobs will address it with a 95% probability (and 100% probability he'll remind us of his memo to the music industry in the process).

7. Jay-Z and Apple form record label - One of the more fun rumors to crop up in the past week or so, is that rap mogul Jay-Z has joined forces with Apple to start a new record label. One would have to assume that a record label run by Apple would use digital distribution exclusively, which isn't necessarily a bad idea. Jay-Z has his hand in everything, and Apple does always end the Jobsnote with a musical performance... still, 10% probability.

8. New Cinema Display - We haven't had new models since 2004. The longest time between updates since the product line began in 1999. The time seems right for an update, perhaps with official Windows drivers? We'll, but I'll cheat and make this one a push: 50% probability.

9. The return of the Newton - There are many who think/hope/wish/yearn that Apple will release a tablet PC. Their multitouch tech would make for one killer tablet, and people are more responsive to non-PC computing devices now then they were 10 years ago. But there is a problem with this idea: Apple already has a PDA, and it's called the iPhone. So the probability of them launching a larger touchscreen device right now is 0% in my opinion, because it runs the risk of cannibalizing some of the iPhone/iPod Touch market. However, I'll give 40% probability to a touchscreen Macbook.

Steve Jobs photo credit: dfarber

Yesterday, we heard that Warner Music Group had teamed up with Amazon to offer its entire catalog DRM-free. They joined Universal music and EMI music, as well as 33,000 independent labels in pushing Amazon's catalog to 2.9 million tracks. That's still well short of Apple's 6 million or so tracks offered via iTunes, but Apple's DRM-free selection comes only from EMI. Warner and Universal have chosen so far to deal just with Amazon.

Amazon is starting to feel like a real threat to Apple's monopoly on the music download biz. They seem to have the cooperation of the music industry in offering DRM-free tracks, and their lower pricing (generally $.89-.99 per track) already forced Apple to lower its own DRM-free prices earlier this year.

Further, Amazon's MP3 store soft launched in September and has had little advertising. So far it has gained about a 3% share of the total market (more according to other reports) -- measly compared to Apple's iTunes -- but in just over a month, Amazon and Pepsi are planning a large Superbowl promotion to give away 1 billion free songs via the service. According to Billboard, when Pepsi offered 100 million free tracks via iTunes in 2004, just 5 million were ultimately redeemed over the 5 month promotion period. But since then, digital music has grown 416%, so it's a safe bet tht this promotion will be more successful. Could the Superbowl be a coming out party for Amazon in the music download business?

Additionally, Apple faces more competition in the digital media player market. Microsoft's Zune.net web site reportedly saw a 299% jump in traffic on Christmas day. Granted, Apple's iTune's store page still received 6 times the traffic, but the Zune.net numbers might be indicative of a strong holiday season for Microsoft's player.

Apple's iPod line still holds about a 70% market share (March), but that is down from over 90% just a couple of years ago. Better offerings from Microsoft, Sandisk, and other competitors are certainly putting a dent in the iPod's commanding position in the MP3 player market, albeit a small one.

Why Apple Will Continue to Rule the Digital Music Landscape

Even though it looks like a confluence of recent events is finally pointing to a weakening in Apple's digial music strangehold, the reality is that there still remains a long, long uphill battle for Amazon, Microsoft, and the rest. Further, in order to really take down Apple, both Amazon and Microsoft (or Sandisk, Creative, etc.) need to succeed. Apple has opened two fronts in this battle, iTunes and iPod, and in order to take them down, you have to beat them on both.

Too many people are already ingrained in the iTunes+iPod experience, and for many of them, DRM doesn't matter. They buy tracks on iTunes and put them on their iPods. As long as iPods control the player market, iTunes will control the download market. And let's not forget that Apple sells about 2 million DRM-free tracks of its own, so it has hardly sat on the sidelines while competitors have added copy protection-less tracks to their offerings.

Until the music player market shifts dramatically away from iPod dominance, DRM-free tracks will generally matter less to the majority of the MP3-buying public, who just won't be affected since they are using iPods. Once that happens, though, then all things being equal selection-wise (i.e., assuming the major labels working with Amazon eventually work with Apple as well to sell DRM-free tracks) and price-wise (which it is already), it likely comes down to buying experience.

The most intriguing prospect for that shift? The potential for an Amazon digital media player. Amazon began selling hardware late in 2007 with the release of the Kindle e-book reader, so perhaps an Amazon media player isn't so far-fetched. It would replicate the vertical integration of the iPod and iTunes store that has been a major part of Apple's rise to control over the industry.

Then again, as TheStreet.com points out, "with iPod satisfaction rates running at over a staggering 90%, and competitors like Microsoft failing to dent its market share, an Amazon-made device would likely struggle to dislodge Apple."

Conclusion

Eventually, Apple might lose some of its grip on the music download and media player industry. But while Amazon and Microsoft take baby steps in competing with Apple, the Cupertino, CA-based company is not standing still. Microsoft made positive changes to its Zune, but Apple released the iPod Touch (and updated the rest of the iPod line), plus signed distribution deals with Starbucks to deliver iTunes tracks over wifi in-store. Amazon signed two more major labels onto its MP3 download store, but Apple is already expanding into video rentals (i.e., onto Amazon's turf to compete with their Unbox service).

It seems likely that Apple's dominating position over the music download and media player markets will continue for at least a few years. What do you think? Is there and end to the iPod/iTunes monopoly in sight? Does Amazon, Microsoft, or some other company have what it takes to take on Apple? Let us know in the comments.