Wednesday, January 30, 2008

Nokia to share music revenues with Operators

Nokia, the world's biggest maker of mobile phones, will share revenue with phone operators from a program to sell handsets with unlimited music access according to the Nokia's head of entertainment.

``In those cases where we cooperate with operators, there will be an arrangement so they can get a piece,'' said Tero Ojanpera, an executive vice president and a member of Nokia's executive board, in an interview today in Cannes, France.

The Finnish company unveiled in December the ``Comes With Music'' program, which will allow customers to buy a phone with a year of unlimited access to millions of tracks included in the purchase price. Nokia agreed to offer tracks from Vivendi SA's Universal Music Group, and is in talks with other major labels.

Its a good start for the world's largest mobile phone manufacturer to offer a revenue sharing scheme but not too sure whether how the Operators will see this gesture. Most of the Operators
sell music downloads to subscribers to help lift average revenue per user. Nokia's shift into services has caused concern among phone companies about how revenue is spread among the players.

Even if Nokia isnt in this space they are many other music providers who had started offering music over the internet. At this present moment most of the musics on the mobile are actually side loaded from the PC downloaded via the internet and most of them are ripped from the CDs. In order for the mobile music to take off, all the providers including Nokia must have strong value proposition why users should pay for the services or in Nokia's case, why pay more for the handsets.

The bundling of musics with Nokia phones is a great value proposition and if the incremental cost to the phones arent that high, users will see this as a good value. With unlimited downloads offered via "Comes with Music"program, Nokia is in good position to shape the mobile music industry. I guess thats the advantage of having 40% market share afterall with such volume, i m sure its alot easier to negotiate with the record labels and get the best deal.

With a whole array of services offered via the Nokia branded phones, from music, games, maps, gps, and many more, Nokia is in a good position to continue dominating the market. If i were to be one of their competititors, i certainly need to think harder or eventually surrender it to them. The only area that Nokia needs to improve is on the design. While the features are great, the shape and design has still some catching up to do. I m sure they can learn from Apple and Samsung. Who do you reckon as a real competitor to Nokia in the longer term?

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