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Tesco, the UK’s largest supermarket retailer has recently announced that it will launch its new music and video download shop "Tesco Digital" next month, in an aim to compete with iTunes.  The service will initially start off with a library of 3.3 million songs, with just over half of them free of DRM.  Tesco plans to make its entire library DRM-free by the year end as well as include movies and TV shows.  This will also make it the first major retailer in the UK to offer music downloads without DRM.  Its library is expected to include music from the four major labels, which may also make it the second legal music download store to offer DRM-free music from the four major labels.

As Apple relies on its iPod sales rather than its song sales to make profit from iTunes, it is unclear at this time how Tesco will try grabbing the attention of existing iTunes customers.  So far the retailer has not announced any pricing for its upcoming download service other than that its music would be competitively priced and that track prices would very from artist to artist.  As Tesco is the leading UK retailer, one way it could try would be to use in store advertising and offer Clubcard points for song and album purchases.  Another potential way would be to undercut iTunes pricing to try bring in extra potential customers to its online grocery shop to make up for the losses incurred by the music service. 

While Amazon already offers DRM-free music from the 4 major labels, it is available to US customers only at this time.  As a result, apart from iTunes which offers the EMI catalogue DRM-free in the UK, only 7 Digital and play.com currently offer DRM-free music in the UK, but with small catalogues mainly limited to independent artists.  Tesco already has an existing music service that it launched in 2004, but this service is heavily crippled with DRM and purchased music could only be played on a PC.