Apple’s competitors and the music labels think they’ve found a formula to compete against the seeming lock iTunes and iPods have on customers, according to BusinessWeek. Force Apple to maintain DRM on most songs while touting DRM-free music by the competitors. The problem is, for now, the strategy isn’t working.

The reason for the failure, so far, is that customers don’t seem to care about the DRM on their music because it’s transparent on an iPod and a Mac or PC.

According to Peter Burrows, a major label in concert with about a dozen big music retailers has been trying to gauge the importance of DRM. "DRM-free sales are very good at Amazon and Walmart," said a source familiar with the test. "But DRM-enabled products are doing just about as well."

As a result of that, Apple needs only to pay lip service to the idea of DRM free music, all the while knowing that the DRM on most of its music keeps its customers trapped on the iPod platform.

One could argue that if Apple was so successful at bringing NBC back, it could negotiate an agreement with the labels to drop DRM entirely. The problem there is that it’s in both sides interest to maintain the DRM: Apple to keeps its customers corralled and the labels to offer customers a competing carrot.

Mr. Burrows recalled the famous Steve Jobs’ "Thoughts on Music" from 2007, and noted that while Mr. Jobs hoped for "a world where every online store sells DRM-free music encoded in open licensable formats..." it’s not in Apple’s interest to actually do that right now.

iPO notes that it may take a long time for the casual Apple customer to start agitating for DRM-free music and begin to defect from iTunes. The danger is that if that tipping point happens and Apple is left holding the bag of DRM music, the industry and all its players could surge forward, leaving Apple behind with no real recourse.

That puts Apple in a desperate position of building ever more compelling iPods and its successors to maintain its grip on the iTunes customer. Whether that strategy will continue to work or whether the music industry has figured out a winning move all depends on the loyalty of Apple’s millions of iTunes customers.