• by Sarah Mahoney  @mahoney_sarah, October 16, 2006

Starting with an exclusive single from Diddy, electronics retailer Best Buy is making some noise with its new Best Buy Digital Musical Store, which opened yesterday at stores and on its Web site.

Much as Apple built iTunes to support its iPod, Best Buy's new music service, which is powered by RealNetworks' Rhapsody 4.0, works with SanDisk Sansa e200R Rhapsody MP3 players. The versions sold at Best Buy have been optimized to work with the new service.

The devices also resemble Microsoft's new Zune player, which launches with an online companion Zune Marketplace on Nov. 14. But Zune lets people share music through a wireless connection.

It's uncertain exactly why consumers would choose the Best Buy option over the popular iPod. The high end of Best Buy's Sansa line costs around $250, and offers 8 GB of storage. That's roughly the same price as the Zune and the iPod, which offer nearly four times more storage at 30GB. Meanwhile, Sony just announced that its new Walkman--also about $250--can upload songs.

In the U.S., 18 percent of recorded music sales are now made through digital channels, according to a report released this week by IFPI, a trade group that represents the international recording industry. Digital music sales increased by 84 percent to $513 million in the first six months of 2006, versus a 7 percent sales decline in physical music sales.

Unlike the iPod, the Sansa and the Zune also have an FM tuner, and come with some content preloaded. And whereas iTunes listeners can only buy their music on a per-song basis at 99 cents each, Best Buy also offers a subscription to unlimited downloads for about $15 per month, as well as 99 cent songs. Zune will also offer $15 monthly subscriptions, and a prepaid card system to buy songs individually.

Brian Lucas, a spokesman for Best Buy, said the service is being marketed in Sunday circulars, in stores, and on its Web site. New exclusive music, like Diddy's Press Play, will likely be heavily promoted near the holidays.

Lucas, who declined to say what percentage of the company's sales are music-related, said the move isn't so much an assault on Apple "as it is an attempt to expand the pie. We still sell iPods and iTunes download cards, and we think they're great. But there are a lot of people who haven't gotten into this space yet, and we want to make it appealing to them. With the Best Buy Digital Store, we're trying to create a seamless way for people to learn about new artists and buy more music," he said. "As long as people have a good experience with whatever kind of music they consume, they're going to consume more."