Will Philips + RealNetworks deal threaten Apple and Microsoft?

A pact unveiled at CES around Rhapsody -- a joint venture between RealNetworks and MTV -- and Dutch-based manufacturer Philips looks likely to benefit both sides in the young and promising market of music players.

In the still largely untapped international music player market, Rhapsody will now gain a hardware device that could put it within closer reach of Apple's iTunes and Microsoft's Zune site, while Philips will get an online platform for selliing a new brand of consumer device in North America.

In an announcement issued at CES, RealNetworks -- the company that co-owns Rhapsody in conjunction with Viacom's MTV Networks -- is teaming with Philips to provide online music that will run on players from the Dutch-based consumer electronics maker.

Do Apple and Microsoft have that much to worry about? According to analysts' statistics, Apple continues to hold a commanding lead of the music player market. Microsoft is much further behind, but it's still already on the map.

In April of 2007, the NPD Group broke out that market as follows: 73.9% for Apple; 9% for SanDisk; 3.3% for Creative; 2.3% for Microsoft; and 2.2% for Samsung.

But music players still represent a very young market, and a lot of shuffling in the ranks could happen before that market reaches maturity.

Meanwhile, In-Stat has predicted that by the year 2010, the market for digital music players will grow to 286 million units, more than double the market of 140 million units back in 2005.

Presumably, there's plenty of room in that greatly expanded space for at least one more major competitor.

On the other hand, Apple's iTunes and Microsoft's Zunes site have each started abandoning their previously rigid controls over DRM. These days, the vendor pendulum seems to be swinging more toward boosting sales of online content and less toward tight coupling of an online music store with a specific hardware platform.

Still, though, the newly announced pact seems totally in line with Philips' current attempts to transform itself in some new directions, and with Rhapsody's need to offer music players to subscribers if online competitors Apple and Microsoft are doing so, too.