Universal challenges iTunes with free music streaming service

New York (NY) – Universal is challenging Apple’s iTunes with a new music service dubbed Total Music. The site provide free, ad-supported music streaming, allowing anyone to embed the service on their own site. Its goal: To derail iTunes.

Universal Music and Apple have never been in love. This was especially apparent the music label refused to re-new a one-year contract to provide its content with iTunes. Instead, Universal is now re-newing its content on iTunes on a monthly basis, threatening to withdraw its music catalogue any time. The label has been very vocal about the need to create iTunes alternative and break Apple’s choke hold of the music market. It appears that Universal is now making a first step in this segment, offering a free music service alternative to iTunes that is based on different business model that relies on advertising as the sole source of income.

According to TechCrunch, Total Music arrives as an unwanted child from Universal’s previous marriage with music player vendors – a relationship that did not last due to anti-trust concerns. The label re-worked the original idea and now plans to offer free music streaming on a wholesale model, enabling anyone to embed music content on their own web site. The service would also introduce a download option in online and mobile environments. Apparently, social networking features are also in the works to simplify music discovery and sharing.

Free streaming music is always an interesting idea, but Total Music will be facing tough competition from services such as Last.fm. However, Total Music could use the social networking aspect and the warehouse idea to its advantage. If enough web sites are embedding Universal’s free music streaming and if the music content will go beyond Universal’s catalog, the service could have a shot. That, of course, will depend on how Universal plans to share ad revenue with web sites.

Ironically, Total Music is the result of Universal’s failed initiative to combine major labels and offer a free music subscription with music players like Microsoft’s Zune. A one year free subscription was included in the cost of the device. The plan was met with lukewarm reception among music player vendors, which were reluctant to increase the cost of the device or cut into their own margins. Universal was forced to give up on the idea due to a possible anti-trust investigation. The label turned to mobile phones, joining forces with Nokia’s new service dubbed “Comes with Music“. It provides Nokia handset users with the ability to download an unlimited amount of music for free for 12 months.

Apple’s music store is currently under heavy pressure from all sides, on all markets. Sony, Vivendi and Universal joined with MySpace to create an online music store that will reach the 100+ million members of the popular social networking service. Nokia already operates a Nokia Music Store in nine European countries, Australia and Singapore. Peter Gabriel’s 7Digital is particularly strong in the UK where Universal last week launched Lost Tunes, a new DRM-free 320-Kbps MP3 music store specialized on exclusive titles, rare titles and overlooked classics. The label also formed a joint venture with Sky to deliver is entire music catalogue to a DRM-free hybrid subscription and digital download music store in the UK and Ireland.

In the U.S., Amazon is gaining traction with its DRM-free MP3 store. Amazon recently surpassed retail chain Target in total U.S. music sales. However, iTunes rivals so far have not been able to slow the pace of Apple’s five-year-old online music store. According to the latest NPD numbers, the download-only iTunes service now leads U.S. retail music sales, ahead of Wal-Mart, Best Buy, Amazon and Target that sell both downloads and physical CDs. In terms of digital-only music sales, iTunes controls an estimated 70% of the worldwide digital music sales market.