Microsoft's Online Store More Buzz Than Music

The idea that music subscriptions could lure enough customers away from iPod looks unlikely, given that downloads are expected to account for two-thirds of the approximately $300 million expected to be spent on online music this year and that only one-third is expected to be spent on subscriptions, according to Forrester.

The other remaining wild card is the free peer-to-peer file-sharing from successors to the original Napster, which was shut down by a court order in 2001. Although record labels have been suing individual users of free peer-to-peer sites and lawmakers have introduced legislation to clamp down on the sites, the most popular one, Kazaa, still attracted 16.4 million unique visitors in May, the latest date for which figures were available from comScore Media Metrix. And a recent appeals court ruling in favor of file-sharing Grokster and against plaintiff Metro-Goldwyn-Mayer Studios(MGM Quote) assures that such file-sharing sites will survive for some time to come.

Despite the millions of visitors still using the free sites, Forrester estimates that 90% of the market still has yet to sample online music. The entry of big names such as Microsoft -- to be followed later this year by Yahoo!(YHOO Quote), Virgin Records and MTV -- may finally entice more consumers to test the online music waters.

Of course, they'll have to execute with services that are as easy to use as Apple's. But in Microsoft's case, it may not be the first time that getting it right at the start won't matter much.

After all, the first versions of Windows and Internet Explorer were nothing to fawn over, yet later versions displaced early innovators such as Apple and Netscape Communications, Forrester's Bernoff noted. "It's always a mistake to underestimate Microsoft," he said.

"They always do win," he added. "It just sometimes takes many years."