For years, Sony has seemed reticent to embrace the Internet as a means of distributing music, despite its unique positioning as the only company in the world with a major music label, a computer hardware division, and a consumer electronics arm. But finally, in the face of incontrovertible evidence, Sony executives admitted that this is the year of the online music store and that it couldn't risk letting the likes of Apple steal the show, the way Sony itself did with its introduction of the Walkman more than 20 years ago. Yesterday, the company announced its own online music store, called Connect, to compete with Apple's market-leading iTunes Music Store and other services.

Actually, I should be careful how I use the phrase year of the music store because, as I write this, I'm wearing a T-shirt from the 2000 MP3 Summit held by Michael Robertson's MP3.com, and it declares 2000 to be the year of the MSP, which, as nearly no one knows, stood for music service provider. (Note: CNET Networks purchased certain elements of MP3.com, with which it will relaunch as a destination site for music fans; check it out here.) Incidentally, the main reason MSP never became the household name that iPod did is that Sony and the other major labels refused to license their music to a wide-scale MSP until Apple iTunes came along.

But these are different times, and Sony has finally decided to quit experimenting. Instead, it has released a full-featured online music store called Connect, embedded in its jukebox software, SonicStage. From initial inspection, the software and the store appear to run fairly smoothly and intuitively. Like iTunes, the store generally sells music downloads à la carte for 99 cents a pop and complete albums for $9.99, and it's designed to work with Sony audio devices. Although Apple is entrenched in the top MP3 player and MSP spots, Sony has two competitive advantages: it offers more than one portable device that can play the music it sells, and it owns a substantial catalog, so the company has to pay licensing fees only to the other labels. In contrast, Apple must pay Sony as well as the different labels, and it owns no music.

I played around with SonicStage and Connect a bit and discovered some interesting twists.

Sony's Hi-MD MiniDisc players really could challenge the iPod. Right now, Apple is riding high on the success of its award-winning iPod, which continues to be the "it" device for portable audio. But it could shortly face stiff competition from Sony's soon-to-ship MiniDisc format. I know what you're thinking: MiniDiscs are so 1999 (although they're much more popular abroad than in the United States). But each of the new Hi-MD discs (the Hi means high capacity) can hold about a gigabyte of music and will cost only $7. Compare that with the iPod's only expansion option: buying another iPod. As if that weren't enough to give them a fighting chance, I fully expect Sony's Hi-MD Walkman players to blow away the iPod in terms of battery life. Finally, Sony's MiniDisc players will be able to make high-quality recordings using a microphone, a line-level input, or an optical input, then upload those recordings to SonicStage. Contrast that with the iPod's limited ability to make only low-quality voice recordings with a third-party add-on.

As for design? The iPod certainly is beautiful, with a scrollwheel that's an engineering marvel. On the other hand, Sony is no slouch when it comes to making slick, compact devices.

Sony's three divisions are finally playing nice. Industry insiders have long observed that Sony's three divisions--consumer electronics, computer hardware, and the music label--never seem to get along. I can recall simultaneously testing a Sony MP3 CD player (from its hardware division) that accepted any MP3 and a Sony flash MP3 player (from its consumer electronics arms) that worked with only songs converted into the company's secure OpenMG format, while Sony's songs (from its music division), like tunes from the other labels, remained inaccessible to online distribution services that could have increased sales of those two players. SonicStage seems to connect the dots between the three entities. The program can burn purchased songs to an MP3 CD, an audio CD, or Sony's proprietary ATRAC3 CD, as well as copying audio CDs and transferring Connect-purchased music from Sony's label and many others to Sony's flash and (most likely) hard drive-based MP3 players.

Sony's MP3 players still won't play MP3s--but could they eventually play songs purchased from other online music stores? Sony's Memory Stick digital audio devices have never played MP3s; in order to load MP3s onto a player, you first have to convert them to the Sony OpenMG codec. This means either waiting for Sony's software to transcode MP3s on the fly (which slows down file transfers considerably) or transcoding all of your MP3s to OpenMG, storing them on your hard drive (this speeds up transfers but doubles the disk space required by your music collection), then transferring them to the Sony player.

I don't think Sony is ready to move away from this strategy, especially because you have to transfer songs only once with Hi-MD, so it doesn't matter if the process slows down during format conversion. Plus, in SonicStage's Advanced Options window, you get to "[s]pecify a folder for copyrighted content downloaded from a music service (Electronic Music Distribution service)." It goes on to say, "[t]his content is converted to OpenMG format and stored in a folder used by all EMD players." Most likely, this is also the folder where MP3s converted to OpenMG are stored before being transferred to Sony's digital audio players.

But could the same folder also be used for holding music converted from the formats sold by other online music stores? At first, it seemed crazy to me that Sony could potentially want its digital audio players to work with music bought from Apple. After all, Apple won't let songs from Wal-Mart (now the No. 2 online music store, according to NPD Group) or the rest of its competitors play on the iPod. But when you realize that every online music store sells music from Sony's record label, it becomes conceivable that SonicStage could eventually accept songs purchased from iTunes, Napster, BuyMusic, or anywhere else.

SonicStage fears networks and sharing. While reading Sony's usage agreement (you always read them before clicking the I Agree button, right?), I noticed that it said, "You may not use the SONY SOFTWARE over an internal network or distribute the SONY SOFTWARE to other computers over an internal network." One of the features I like the most about iTunes is that while I'm at work, I can listen to music that lives on the computers of other iTunes users on CNET's fourth floor. Not only does SonicStage block this sort of stream sharing, it could even completely prevent usage on a large network. I haven't done enough testing to be sure, but so far, I've been unable to install SonicStage on my CNET computer (I had to to test it at home). Either way, Sony's fear that songs purchased from its online music store could escape to the masses for free are abundantly clear.

Looking forward
The fact that Sony sells both music and MP3 players has made the company nervous for years, but now that consumers are finally ready to spend money on secure music, this could be the perfect time for Sony to reenter the race. While it faces a challenge in educating the public about the merits of Hi-MD vs. the more glamorous hard drive, perhaps consumers will eventually see the value proposition of Sony's cheap, removable memory, especially considering its battery-life advantage.

Still, in order for the Connect store to succeed, I think Sony needs to loosen up a bit about the copyright issue. At least Connect, like iTunes, allows you to burn CDs from purchased music and de-authorize a computer in order to upgrade to a new machine. (Napster, somewhat unbelievably, does not permit you to do this; if you purchase songs from Napster and plan on using them on more than two other machines for the rest of your life, you're out of luck.) But that doesn't change the fact that all of these services are also competing with the open P2P networks, which impose no rules at all. In other words, the company with the most open approach to copyright could have an advantage. So far, that company is Apple.

Sony makes great hardware, and from initial inspection, its online music store runs fairly well. But the competition between online music stores is fierce, and ultimately it's the consumers who will decide which one comes out on top in the second half of this, the real year of the MSP.