Music Labels Look To Corral iPod

The approximate 300,000 people who've picked up a copy of the Backstreet Boys' "Never Gone" might not know it, but they're part of a growing skirmish between the record labels and digital music master Apple Computer.

Both Sony BMG and EMI are rapidly increasing the number of copy-protected CDs they release in the U.S. CDs with the protective technology prevent users from posting them on the Internet and allow users to burn only three copies onto other discs, which themselves can't be copied again.

Sony BMG is already selling about half its discs with the technology, while EMI releases its first this summer.

But the technology also prevents consumers from transferring songs onto an iPod, the Apple digital-music player that currently holds about 80% of the U.S. market.

That's because the technology uses Microsoft's (nasdaq: MSFT - news - people ) Windows Media software, which isn't compatiable with iPods.

Both labels hope to reach a deal with Apple, which will allow users move songs onto iPods. But by launching the copy-protected CDs without iPod compatibility, the labels are raising the stakes in an ongoing conflict between Apple and the rest of the music business, which wants the tech company to open its proprietary iPod and let others sell antipiracy-protected songs that work on the device.

Apple has refused, relying on the thus-far successful strategy of forcing users to buy music from its iTunes Music Store.

IPod owners who buy one of the growing numbers of copy-protected discs are likely to chafe at the incompatibility. The question is, who will they blame?

If it's the labels, Sony BMG and EMI may have to back down. But labels are clearly hoping it's the other way around.

Asked how users should react to the problem, one insider at a major label responded, "Maybe they'll send Steve Jobs an e-mail."