Nokia World 2007: ‘Nokia Comes With Music’ – Too Good to be True?

| Dec 4, 2007 | Wireless Services - Europe | Show Update
| Analyst: Emma Mohr-McClune

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

On December 4th Nokia announced its ‘Nokia Comes With Music’ program, which will enable customers to buy a Nokia device with a year of unlimited access to millions of tracks from a range of artists – past, present and future. After one year, customers will be able to keep all their music. The program will launch in mid-2008 with Universal Music Group International and Nokia is in discussion with the remaining major international labels.

Analytical Summary

• Current Perspective: Positive on Nokia’s ‘Nokia Comes With Music’, with reservations. Although a year’s free, unlimited and fully-owned music tracks from Universal Music bundled with a new device sale seems too good to be true, all the critical service details (device cost, side-loading limitations, DRM-limitations and the role of mobile advertising in this offer) are all unknown at this time.

• Vendor Importance: High to Nokia, as ‘Nokia Comes With Music’ will help the handset vendor launch itself into the consumer content services space with an original, eye-catching and potentially disruptive proposition that currently has no equal. Nokia’s Music Store initiative was a ‘me too’ proposition in a crowded digital download market, but ’Nokia Comes With Music’ will provide Nokia with compelling differentiation both in the device space (notably against SonyEricsson, Motorola and Apple) and content services space.

• Market Impact: High on the mobile music market, as ‘Nokia Comes With Music’ could be the catalyst for a change in the way mobile music is bought and sold in Europe. Providing new Nokia device owners with a year’s worth of unlimited music tracks is a highly original proposition that challenges traditional per-track pricing models, and even subscription models going forward.

Competitive Concerns

• The planned retail price of a ‘Nokia Comes With Music’-enabled device is currently unknown. Without this critical cost element, it is impossible to calculate whether the value proposition makes any sense to consumers.

• Tracks downloaded under the ‘Comes With Music’ program will be protected by DRM, and rights to the music will not expire after the access period is up. However, that’s about all that is known at this time: when pressed, Nokia product managers could not (or would not) explain concisely what the terms of use will be.

• At this point in time, Nokia only has one music label signed up to the program – Universal Music. Although Nokia claims to be ‘in negotiation’ with other labels, if Universal is the only label involved, consumers will have a fairly limited selection of music. Consumers are loyal to artists, not labels.

• ‘Nokia Comes With Music’ may challenge some of Nokia’s core customers– service providers with their own mobile content services to protect. The prospect of a year’s-worth of free, fully-owned downloadable tracks bundled with a Nokia device represents a real marketing challenge to mobile operators’ own mobile music portfolios.

• End-users will necessarily need to factor in the cost of downloading music tracks to the ‘Nokia Comes With Music’ device. Mobile operators – not Nokia – hold all the key cards here when it comes to fashioning an attractive data tariff to go along with this service.

CLIENTS ONLY

Current Perspective

Competitive Positives

| Client access - Wireless Services - Europe | More information

Top