Print 3 comment(s) - last by FITCamaro.. on May 7 at 12:28 PM

Another test of free music business models comes as Nokia rolls out its Comes With Music service

Free music is becoming a hot proposition.  From Radiohead giving away their newest CD In Rainbows to the new music download service SpiralFrog, free is catching on.  However, when you dig into it, free isn't really so free -- SpiralFrog is funded by ads, and Radiohead asked users to pay for the CD out of their good will for the band.  Still, these trends to some still represent a positive change in the music business -- the shift from making a buck at any cost or gimmicks to making an honest buck based on the listener's appreciation.

Nokia is joining the crowd with its 'Comes With Music' program, which it is launching this year.  The service will offer unlimited music downloads to phone buyers.  The gutsy gambit has been much maligned by critics, who say that the service will cost Nokia and record labels money.

Not so says Nokia.  Liz Schimel, head of Nokia's music business is a firm believer in the service.  She states, "We expect to make money both from our traditional device sales, as well as from the 'Comes With Music' service.  I can assure you that we are looking out for everyone's interests in creating these new business models, including our own."

The new service pushes the envelope in that users get to keep the music they download during the 12 months of the service.  Despite the risk, Sony BMG and Universal have made deals with Nokia to offer their tracks on the service.  Schimel and Nokia hope that having the world's two biggest music on board the project will attract smaller labels and independent artists.  She states, "This new model is innovative and creates a positive situation for all stakeholders, but it does require a different way of thinking for our content partners."

Initial reports indicated Nokia would give Universal a payout of $35 per phone sold and an additional fee after the download of 35 songs.  Combined with whatever compensation Sony BMG is receiving, such numbers could more than nullify the typical 40 percent gross margin of the company's cell phones.  Not so says Schimel.  She states, "Recent articles that I've seen have fundamentally misunderstood the concept behind the Comes With Music model."

Some fear that Nokia's push will harm already slumping cd sales, while others thinking it will save the music industry.  One thing's for sure, if Nokia succeeds it may be the new number one in online music.  Last year it sold 146 million music phones.  If it paid a mere 20 dollars to the record labels per phone it would surpass the entire 2007 digital music market of $2.9B USD.  Tero Ojanpera, head of entertainment and communities business at Nokia states, "Comes With Music has the potential to equal -- and even exceed -- the current value of the business.  If we sell a single percentage of our total sales as Comes With Music bundles, the revenue for the music industry would be almost the same."

Some say that the service is a major threat to Apple's iPhone and iTunes, possibly stealing the trendy giant's thunder.  Mark Mulligan, research director at Jupiter Research states, "Comes with Music is one of the most exiting things out there in the digital music.  Apple is facing market perception of iTunes looking like yesterday's service. Basically, iTunes looks pretty much the same it looked 4 or 5 years ago."

However, the real question remains -- even with great sales how is Nokia going to pay for the service?  Therein lies the real head scratcher.  Nokia's secrecy is certainly worriesome, but one can only hope that such a big company would know better than to hang its hopes massively on an unprofitable service.  So for now, readers can contently believe that music grows on trees -- or err... cell phones -- until the market proves otherwise.

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Shout out!
By MFK on 5/3/2008 12:27:26 AM , Rating: 2
I shall shamelessly use this as an excuse to display some fanboyism of my own.

You all have your own chances all the time with ps3/Xbox, Mac/PC or AMD/Intel debates, but I swear, I'm neutral about all that, but cellphones are one thing that I am very passionate about.

I have used Nokia phones all my life.
By some unfortunate accident, I had the chance to briefly (5 - 6 months) use Sony Ericsson and Motorola phones.

Call it bias or blatant fanboyism but I HATED using those phones. I couldn't for the life of me ever understand how Motorola has the biggest share in the North America cellphone market.

In the Middle East where I spent most of life, Nokia IS the cellphone.

And having had the chance to compare both their phones I cannot see how Motorola even holds a candle to Nokia.

The most cleanest, most efficient interface exists on the Nokia phones. Agreed, their high end offerings like the N9xs are sluggish. But that is only because of how feature packed they are!

Sorry to be such an ignorant fanboy! But yea, all my dad ever used and uses is Nokia, all I ever use is Nokia and all my kids will ever use is Nokia! :P

The one good thing that I see coming out of this "Comes with Music" thing is that I might finally get around to obtaining my music by legal means! :P

Bury this meaningless post, please!

RE: Shout out!
By FITCamaro on 5/7/2008 12:28:11 PM , Rating: 2
Personally I find Nokia's poor phones. The interface isn't terrible just the screens are normally tiny so its hard to see anything. I much prefer my new LG Envy. It's a large phone by todays standards but that means I can actually hold it. The camera takes decent pictures and the interior screen and keyboard are excellent.

I don't talk a whole lot but the battery typically lasts at least a week. Granted that will degrade as time goes on. About the only thing that could improve it is that the camera shutter to protect the lens could open and close automatically instead of being manual.

Sounds like a fine deal
By AlphaVirus on 5/2/2008 5:13:50 PM , Rating: 2
I like Nokia phones, and usually the company has the customer in mind along with shareholders. This new Comes with Music plan sounds like a good deal for us all, customers get 35 free tracks and this will drive more people to purchase a Nokia.

If I was in a cell phone store and the salesman said "This Nokia comes with 35 free music tracks" I would be skeptical at first but would spread the word if it were true. I usually try to tell others when I find a good deal, so they can share in the fun.

I was looking to replace my 1yr Nokia5300 Xpress so perhaps I can see about getting a new nokia.

"It looks like the iPhone 4 might be their Vista, and I'm okay with that." -- Microsoft COO Kevin Turner

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