Back around 2002 or so, I was convinced that Windows Media Audio (WMA) was the future of digital audio: It offered better compression, better fidelity, and smaller file sizes than the industry standard but ancient MP3 (MPEG-1 Audio Layer 3) audio format and Microsoft was pushing it hard with increasingly impressive releases of the Windows Media codecs, Windows Media Player, Media Center, and what seemed like a rich partner ecosystem for devices and services.
But then Apple happened. The company released its first iPod in 2001 and followed that up a year later with a Windows compatible version. Then, about a year after that, Apple released the first Windows version of iTunes, its iPod and digital music management system and front-end to the iTunes Store. Apple wanted nothing to do with WMA, for what I assume are obvious reasons, and was instead foisting yet another audio format on consumers. This format, AAC (Advanced Audio Coding), is the successor to MP3 from a marketing perspective but is, like WMA, really completely different technology.
The success of Apple?s iTunes Store--which, until recently, sold songs only in a proprietary version of AAC called Protected AAC--suggested that maybe Apple, and not Microsoft, would define the next generation of digital audio formats. And its iTunes software, not coincidentally defaulted to plain vanilla AAC for CD ripping whereas Windows Media Player defaulted to WMA.
Technologically, AAC and WMA are very similar, and superior to MP3. They use completely different lossy compression schemes but achieve very similar quality and file sizes at identical bit rates. WMA has the edge in compatibility when it comes to the variety of devices and software that work with either format. AAC, however, has the edge in sheer numbers, but only because the AAC-compatible iPod has sold so fantastically well.
The problem for Windows users--i.e. "the world"--is that AAC doesn't play nice with products made by Microsoft and its partners. AAC isn't compatible with Windows Media Player or Media Center, though you're welcome to buy expensive and balky third party codec packages if you really want to add that functionality. But even if you do that, you won't be able to access AAC content via a Media Center Extender. (Curiously, AAC is compatible with two more recent Microsoft products, the Zune product line and the Xbox 360, but on the latter only through the comparatively primitive blade user interface.) AAC doesn't work with most third party media players, set-top boxes, or portable audio devices either.
WMA actually met these requirements before the iPod rocketed to success. And that's where today's technological stalemate begins. Both AAC and WMA are excellent. But neither is fully compatible across all the products you're going to want to use now or in the future. So they're both non-starters. In my opinion, you, as a Windows user, would be crazy to back either format at this point.
Fortunately, we have that age-old standby, MP3, waiting in the wings. MP3 is everything that AAC and WMA are not: It's compatible with every single software product, service, set-top box, portable media player, or other device you'd care to use. It is PC and Mac agnostic, works equally well in iTunes or Windows Media Player, and can even be configured as the default CD ripping option in both products. Heck, it works great with Linux too, if you should ever move in that direction, you rebel.
MP3 isn't perfect, but its biggest problems are very much offset by some recent developments. For example, MP3 doesn't offer the same sophisticated compression schemes found in AAC or WMA, so you'll need to rip songs in a higher bit-rate with MP3 than you would with either of the other formats in order to achieve the same quality. This results in bigger files, naturally, but thanks to the ever-expanding size of today's hard drives, the file size of individual songs is rarely an issue. Only the most Scrooge-like user would complain about the difference between a 3 MB and 4 MB song file.
Another surprising development has conspired to make both AAC and WMA pass?. Now that the recording industry is finally beginning to begrudgingly embrace the sale of unprotected song files (that is, music files that are not protected by Digital Rights Management, or DRM, technology), online music services are dropping the proprietary formats of the past for pure, simple, and compatible MP3. (Well, everyone but Apple is: For some reason, the iTunes maker has decided that its non-DRM tracks should cost more than the protected versions and should be encoded in Windows-unfriendly AAC.) As of this writing, Wal-Mart and Amazon.com are both offering millions of DRM-free MP3 audio tracks for sale online. Even Microsoft has gotten into the game: In November, it will relaunch the Zune Marketplace with over 1 million "pure" MP3 tracks (rather than pursue some lame non-DRM version of WMA). Other companies will no doubt offer MP3 options soon as well.
The game's over, folks. MP3 won.
MP3 in the real world
I use MP3 exclusively for any audio tracks I create myself, typically by ripping audio CDs to disk, and I recommend that you do so as well.
That said, there are audiophiles and technology trolls out there who might recommend other courses of action, such as using lossless WMA or AAC formats, which take up dramatically more disk space than MP3 files, but don't lose any audio fidelity when compared to the original source. (Don't be confused by the term "lossless," however: These formats are still compressed, unlike the CDs from which most digital audio files are ripped.) This is a foolhardy idea, unless you will never use a portable media device or enjoy the thought of storing and managing two copies of your music collection, one in lossless and one in another format that's been transcoded from the lossless masters. I'm not sure about you, but in my opinion life is just too short to bother with that kind of silliness.
Others may recommend bizarre and unpopular formats like FLAC or OGG. These people are also misguided: While these formats may offer some vague technical advantages over other audio formats, they are even less compatible than AAC or WMA. The people who do use (and advocate) these formats are generally more concerned with religious issues surrounding their disliking of proprietary technologies or products made by companies like Apple and Microsoft. My advice here is simple: Avoid these formats.