Jukebox 2.0

As telecommunications service providers and consumer electronics companies increasingly move into the content delivery business, they are bringing some innovative business models along with them. Digital Broadcast takes a look at Nokia's double-pronged strategy.

  • E-Mail
By  John Parnell Published  November 16, 2008

As telecommunications service providers and consumer electronics companies increasingly move into the content delivery business, they are bringing some innovative business models along with them. Digital Broadcast takes a look at Nokia's double-pronged strategy.

Handset manufacturer Nokia has launched 11 of its Nokia Music Stores around the world and later this month, the Middle East will become the 12th territory to be covered when a UAE-based portal comes online.

Nokia is currently pushing two music business models, both of which are based on the Nokia Music Store online portal. The most recent model is the new Comes With Music (CWM) package offering unlimited access to the music library for a year.

Music is a local experience and that is why we open each store on a country by country basis. Each country’s consumption and usage pattern is different. - Ayman Chalhoub, business manager for music, Nokia Middle East & Africa.

The second is a more orthodox system, offering the users a pay-per-item download service or monthly subscription streaming service. This has been operational since last year and has expanded globally during that period.

"The UAE is one of the leading regional markets in terms of digital connectivity," says Ayman Chalhoub, business manager for music at Nokia MEA.

"It has one of the highest internet penetration rates in the Arab world and an extensive 3.5G network provided by both operators, so it makes sense to open the Middle East's first Nokia Music store in the UAE."

The UAE has been selected as the first Middle East market to receive the service ahead of other markets such as Saudi Arabia for this very reason, although movement into other GCC countries will follow eventually.

"We will look at other markets as we progress but at the moment we believe the UAE has the right combination of qualities to ensure a successful launch," says Chalhoub.

"Connectivity and availability of technology are the key factors at this time. Internet penetration is a high priority. After all, it is an internet-based service we are talking about."

Users will be able to listen to 30-second clips of any song for free before purchasing individual tracks and albums or listening via a monthly subscription based streaming service. Retail prices were unconfirmed at the time of press.

The site will have the same look and functionality as existing Nokia Music Stores in operation worldwide, with some degree of localisation.

"Music is a local experience and that is why we open each store on a country by country basis. Each country's consumption and usage pattern is different," claims Chalhoub. "We will have content from Rotana and Qanawat as well as the international majors. We want to offer the most diverse portfolio of content available. It will be one of the most diverse music catalogues available in the Middle East and its expansion will be ongoing. The site will ingest thousands of tracks on a daily basis."

As well localising through content from smaller regional labels, the site will also feature editorial content and promotions aimed specifically at the UAE market.

Meanwhile, in the UK, where the first Nokia Music Store opened last year, the company is about to move into the second phase of its business plan following the launch of its much-hyped Comes With Music offering last month. The service offers ‘unlimited' music to users who purchase a CWM packaged device. For around US$225 customers get a handset and 12 months unlimited access to the UK Nokia Music Store.

Analyst's viewpoint

Adam Leach and Mark Little, Ovum

"Nokia CWM devices combine a mobile phone with a year's free unlimited subscription to the CWM store. At the end of the contract, consumers can keep all the downloaded music, continue the service if they upgrade their phone, or buy `la carte from the Nokia Music Store.

"Nokia has been bullish with its launch of CWM. Although its target audience of young music enthusiasts rely on operator-subsidised handsets, don't have credit cards and can't afford OTA downloads without flat-rate data plans, Nokia is not waiting for operator support on the ground.

Perhaps Nokia surmises that it is this very bullishness that will push the operators into supporting a music service in direct competition with their own! Nokia's new music service may eventually be seen by consumers as an exciting revolution that lowers the cost of exploring and discovering a sizeable choice of music, but risks being seen by operators as a disruption to business as usual with their most important handset provider.

CWM phones will be offered at a premium that is shared with the music labels. However, if operators have to absorb or heavily subsidise the phones it will cost them dearly; if not the cost will be dropped in the laps of credit-strapped youngsters.

"Nokia emphasises that CWM has value and is not free, and as such generates income for artists and the music industry. The business model pays out a share of handset sales to labels and artists that is in proportion to that of downloads, plus limited supplementary payments over certain download levels. This protects Nokia's margins from bored teens, but not from the bandwidth charges that a highly successful CWM service could create. That said, Liz Schimel, Nokia's Head of Music, is confident that the CWM service will make a profit for Nokia and the labels."


Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code