Two interesting things happened to me this past week, as I was configuring my brand new Verizon Wireless BlackBerry Tour, that suggested glimpses into the future of digital music.  In one incident, I installed the Pandora app for BlackBerry and was greeted with a warning about high bandwidth usage.  In the other, I tried to get the Tour to work with my pre-existing Rhapsody To Go account (which it is supposed to do); after three hours on the phone with Rhapsody and Verizon Wireless tech support, it still doesn’t work.

As a result, I’m now a Pandora addict on my nifty new BlackBerry, and my use of Rhapsody — which dates back several years — has dwindled.

Rhapsody has some advantages over Pandora, to be sure.  You can listen to whatever music you want, on demand, with no limitations.  Sound quality is very good; search, browse, artist information, and library managememt features abound.

Pandora makes it easy to create Internet “radio stations” that you can customize to suit your taste.  But it has various restrictions imposed by its music licensing model, such as limitations on the number of songs in a row by the same artist and the ability to “fast forward” to the next song.  Pandora’s sound quality is also inferior to Rhapsody (in the version for mobile devices).

Yet Pandora is free, and it works with only minor glitches on portable devices.  It also has what many consider to be the best recommendation technology in the industry.  Rhapsody costs US $15/month, has portable device transfer functionality that is clunky at best, and requires PCs to take advantage of the full subscription functionality.

The percentage of the music market that uses sophisticated services on portable devices is small now, but it will undoubtedly grow along with device capabilities, wireless bandwidth, storage, and users’ comfort levels.  It’s not a stretch to suggest that connected portable devices are the future of digital music.

But if these current models are good indications of the future, then the music and wireless industries should both be concerned.  Streaming is less profitable than downloads.  Music companies make performance royalties from streaming, which are much lower than the mechanicals they make from downloads.  It takes a lot of streams to equal revenue from a download.  It’s no wonder that music licensing factions constantly squabble over the (admittedly pourous) boundaries between streams and downloads, such as over cached copies of files on servers and clients.

For wireless carriers, streaming eats up much more bandwidth than downloads.  A growing number of wireless subscribers have fixed-fee unlimited data plans; such users become cost burdens once they get hooked on streaming services like Pandora (to say nothing of streaming video a la YouTube).  Hence the warning Pandora flashes when you first start up your Pandora mobile client.

Both industries, therefore, need to develop better download services for portable devices.  Here are some of the most serious problems that need solving:

• Download services must “feel like free” to the same degree as streaming services do in order to compete in the future, as the iTunes-style piecemeal sale model inevitably gets relegated to the past.  Solving this will require radically new economics, a complete reboot of music licensing models (at least here in the US), or both.
• DRM is necessary for subscription download services.  Yet it must enable seamless interoperability among PCs and portable devices, and current DRMs don’t.  The music industry has done little to foster the development of such DRMs; this has to be fixed.
• Powerful search/browse/recommend user interfaces for connected portable devices need to be developed.

Users ought to welcome good mobile download services, too, especially given how many users are still enamored of the concept of music ownership.

Europe is the scene of a few tentative steps in the right direction, such as Nokia’s Comes With Music and Sony Ericsson’s Play Now Plus (a/k/a TDC Play).   But the main disadvantage of these schemes is that they are controlled by device makers that are, at heart, not interested in the interoperablity that consumers want.

The solution will thus lie primarily with carriers and music companies.  In the meantime, I’ll stick with Pandora.

P.S. Kudos to the MetroPCS store in Belmont, CA, for the excellent service I received in buying my Tour.  Anti-kudos to Verizon Wireless for continuing to jail the GPS on its BlackBerries.