Despite the issues many tech-savvy music fans have with digital rights management and encrypted media files, it looks like the future of digital music will be based on closed, proprietary systems.

Apple’s iTunes/iPod combination has rapidly risen to dominance, a fact that has caused both the music industry and other portable media player vendors a considerable amount of grief.

Apple’s competitors are figuring out that they can’t compete on features alone; they have to provide systems that just work.

Microsoft’s Zune is one of the most notable examples of a new portable media solution built around closed systems. According to the company’s announcement, Microsoft is abandoning Plays for Sure, its licensed DRM media solution, with the Zune. Microsoft’s system will be closed, like Apple’s, trading off flexibility for something that (hopefully) just works.

But Microsoft isn’t alone in moving towards closed, proprietary digital media solutions.

RealNetworks and SanDisk have announced their plans to release a portable music player system that will compete with Apple‚Äôs iTunes/iPod combination and Microsoft‚Äôs Zune. The Sansa Rhapsody, a portable music player based on SanDisk‚Äôs e200, will use Real’s digital rights management system.

The move towards closed systems may actually prove beneficial for consumers. Microsoft is willing to lose hundreds of millions on the Zune, which may force Apple and other portable media player makers to provide more features and greater capacity.

With Microsoft putting its focus on the Zune, companies with solutions built on Microsoft’s Plays for Sure technology are now in a position of competing against Microsoft. Worse yet, Microsoft is willing to lose hundreds of millions on the Zune in order to establish a successful Microsoft portable media platform.

Digital music in 2007 is likely to be dominated by a battle to stake out territory for these proprietary systems, with Apple defending its turf, and Microsoft and SanDisk competing on features and price.

Some, like Napster CEO Dr. William Pence, feel that these closed systems are doomed to fail.

“If DRM is used to erect barriers…..then there is no question it will be swept aside,” argues Pence, “and the industry may end up with what many have believed was the obvious choice from the beginning: open MP3 files.”

Unfortunately for advocates of open, interoperable digital music systems, digital rights management has not proven to be a significant issue for most portable media player owners.

The average portable media player owner has spent about $20 on digital music downloads. For these users, their investment in downloads is trivial compared to the value they get from making their CD collection portable.

While the long-term future of digital music is still to be seen, it looks like the next few years will be dominated by competing closed systems.