Get ready for this love triangle, folks. Based on a memo leaked to The New York Times, RealNetworks is looking for an alliance with Apple against Microsoft's Windows Media Player. Here's the interesting part: Real offers an ultimatum -- work with us, or we turn to Microsoft. What's that? Real is a major component of the European Commission's anti-monopoly case against Microsoft, so a strategic alliance with Microsoft could undermine the case. And some outlets are talking more than just an "alliance", saying Real may actually switch to Windows Media format. (If that doesn't send a chill down your spine, nothing will.) Why the switch in philosophy? Real, in ongoing confusion about what their business model is, appears to be moving to content as its primary revenue stream, instead of the Real audio format.

Where's Apple in all this? Despite Apple's coolness towards any kind of alliance, there doesn't seem to be any reason for Apple not to sign: what Real wants is access to Apple's digital rights management scheme so it can sell music for the iPod and not just the iTunes Music Store. This is about hardware, not software. It would seem to mean more iPods sold, which is Apple's stated goal; Apple has already gone on record that the iTunes Music Store is not a major revenue source.

Of course, there's no saying Apple isn't thinking seriously about the deal. This could be as simple as a memo leaked Apple didn't want leaked; it's just a memo, so Apple would need to talk to Real about details. And I can believe that possibilities. But conspiracy theorists, if you want some fodder, here are some other scenarios. Keep in mind, it's unusual that the memo would leak Job's notoriously tight-lipped organization. So this could be an individual at Apple trying to bring an internal battle into the court of public opinion, or a calculated move by Cupertino. Here are two possibilities:

Scenario 1: Apple joins the dark side. Apple may be dealing with Microsoft, not Real. Microsoft and Apple have already been rumored to be working on some sort of alliance. Real is on the outs, suffering under a lack of business model and sinking market share, and had always been a bitter rival of Apple and QuickTime. Only problem with this scenario: what would the substance of a deal be? Apple is unlikely to build WMA compatibility into iPod, and Microsoft's aggressive marketing of its media player means, unlike Real, it probably wouldn't want to go to AAC with Apple's FairPlay DRM just to earn access to iPod. It would rather wipe Apple off the face of the planet with WMA-compatible players. Just don't dispute this scenario yet: Sony has declared war on Apple, while Microsoft has not, and this wouldn't be the first time Apple got in bed with Microsoft.

Scenario 2: Apple IS in a paranoid fit. This scenario gets a little more complicated: perhaps Apple really does want to keep its proprietary rights management scheme and player, thinking it can beat Real, Microsoft, Sony, and others with the iTunes/iPod connection without any alliances. In a way, this is the scariest scenario, because Apple could be dead wrong. Yes, iPod is superior now in sales -- remember when the Apple II had nearly 50% market share? Cutting off would-be digital music resellers from the iPod could alienate the entire music industry, while the further emergence of iPod as the standard portable digital audio hardware could mean endless sales of high-margin iPods.

What's most encouraging about this memo is that everyone wants a piece of the iPod. Apple should capitalize on the sentiment as much as it possibly can before Microsoft can get its musical world domination plans off the ground.

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