The idea that a credible rival to iTunes could appear from nowhere and compete head-to-head with Apple (as Microsoft has clearly failed to do) seems far fetched to say the least. But never mind, it’s happening. The company that is presumptuous enough to believe it can do this is Omnifone and, given the reports that emerged from the recent 3GSM conference in Barcelona, the press believes it too.

It’s not too difficult to work out why. Omnifone has already sewn up deals with 23 mobile network operators, that have subscribers in 40 countries, giving it a total customer base of 690m subscribers. That’s a potential customer base of course—not all of those subscribers will choose to use Omnifone, but then again not all of the mobile network operators have talked to Omnifone yet either.

It is quite likely that Omnifone will sweep the board as regards deals with network operators—and here’s why: Few of the press reports home in on the killer capability that Omnifone has developed. The Omnifone software engineers have built an automatic configuration capability for mobile phones so that you can feed in the technical spec of a mobile phone, Omnifone software will build an appropriate MusicStation client for the phone—in about 2 hours. (Most handsets can be catered for in this way, but even when one cannot most of the MusicStation client can be built and a few days of manual programming completes the task. There are hundreds of different mobile handsets and Omnifone’s MusicStation will already work on about 75 percent of them).

Omnifone provides a fully scalable server for music downloads, just like iTunes, and it manages the whole process, downloading music, providing album covers, tracking usage and so on. The handset manufacturers like Omnifone because:

1. It isn’t Apple
2. The application is cool (It is, I’ve played with it)
3. It just works on their handsets.

The music business likes Omnifone (especially the big 4; Universal, Warner, Sony and Emi) because:

1. It isn’t Apple
2. They can sell music by subscription through MusicStation

and the network operators like Omnifone because:

1. It isn’t Apple
2. It reaches the vast majority of handsets including those that could only accommodate a few songs
3. It offers them a music revenue stream.

You can do a blow-by-blow comparison of iTunes and MusicStation, but no matter how you toss it up and catch it, it is difficult to believe that MusicStation isn’t going to take a big share of the digital music download market. First think in terms of coverage:

Even in Steve Jobs’ wildest dreams Apple’s beautiful iPhone will not capture more than a few percent of the mobile phone market. Omnifone will probably get most of the rest. Apple is giving exclusive deals to a single carrier whereas Omnifone works with all carriers. To that you can add the fact that the iPhone doesn’t allow direct download to the phone.

A big reason why the Music industry is backing Omnifone is the music by subscription model it operates. The idea is that you pay a regular subscription charge as part of your phone bill and you can have “all you can eat” in terms of music. (The initial roll out will offer 1.2 million songs). The music companies tend to think like this: With iTunes the average user buys around 20 tracks a year—equivalent to maybe 2 or 3 CDs and generating $20 in revenue. With a subscription model at, say, $3.50 per week, the revenues per person will above $160 (eight times as much).

All Omnifone has to do now, to establish itself as the other player in the music market, is to roll out the service (roll-outs have already taken place in South Africa and Norway).

Eat your heart out Microsoft.

P.S. I first reported on Omnifone last year.