Personally, I don't know if Apple is ever going to relinquish their stranglehold on portable music. Their penchant for cool design and easy of use is difficult to match. However, if history tells us anything, hardware has always been a bad bet for maintaining margins and competitive advantages. The further up the stack you go, the higher the margins and more difficult it is to unseat you.

And in today's world, data is at the top of the stack, not software like iTunes. iTunes may have made it really easy to get people set up on the iPod, but its not what keeps them there. The critical mass of artists in the music store keeps them coming, but it seems to me that its only going to get easier to buy music from more sources in the future, not harder. There's nothing really that sticky about it, actually. No data, no network. I've been switching players a lot, actually.

So I thought to myself, why doesn't Apple buy last.fm and really ramp up the social network features? Scrobble everyone and provide social music functionality right there in iTunes. It would b like when AOL announced that they were building a social network on top of AIM. They already had all my friends and I didn't even have to do anything.

Imagine a MySpace competiter that already knows what music you listen to and on day one tells you who has similar tastes, on top of recommending who you should listen to. Plus, because iTunes is actually selling a ton of music, the company has the leaverage to actually get bands to start setting up camp on their last.fm artist pages. iTunes and the iPod spit out a ton of data that their software doesn't use effectively at all, and last.fm has a really neat application to make the most of that data. What if Apple made all of those little last.fm widgets their own little try and buy mini iTunes stores? I think they could get last.fm at a reasonable price relative to the kind of value they could add to it by integrating it with their hardware and software. Seems to me like a natural fit.