Microsoft's Online Store More Buzz Than Music

In addition to the launch of its Janus technology this fall, Microsoft is also expected to eventually offer a monthly subscription music service. Janus will enable subscribers to download their music to portable devices for a set period of time.

As well as eventually enabling both downloads and a subscription service, Microsoft's technology offers more choices than Apple among portable players at a greater range of prices, noted IDC senior analyst Susan Kevorkian, who covers digital audio technologies.

Despite such advantages, however, Microsoft still is expected to end up playing second fiddle to Apple -- at least initially. "The huge player in this market is Apple, and I think [Microsoft] is going to find it a whole lot harder to displace Apple because the Apple experience -- the iPod, the music store, the application -- is so well-designed and pleasing for people to use," Bernoff said.

Piper Jaffray's Munster sang even more praises about future Apple sales. "This Christmas is going to be pandemonium around the iPod. ... Last year it was kind of a buzz, but this year is when everybody gets one," he said. "We've seen the other devices out there, and they're just not that compelling."

For now, iTunes accounts for 70% of legal music downloads, according to Forrester. And Apple's iPods accounted for 72.1% of the hard drive disc player retail sales -- excluding direct sales by Apple -- in the 12-month period ending in June, according to NPD Group. The percentage was even higher -- at 78.4% -- in just the month of June, the latest figures that are available.

Despite Microsoft's efforts, Apple's share of the market stands to grow with Hewlett-Packard's(HPQ Quote) launch last week of its own iPod and Motorola's(MOT Quote)launch next year of cell phones that can download iTunes songs.