Phone
Services like Comes With Music from Nokia, the worlds largest mobile-phone maker, to take on Apple Inc.s iPhone are too little too late, said Tero Kuittinen, an analyst at Greenwich, Connecticut-based MKM Partners.
“The time to really push for a premium service to compete with Apple was two to four years ago,” said Kuittinen, who has a “sell” rating on Nokia. “I give it a year before they close it.”
The offering is part of Kallasvuos push into mobile services, which is aimed at stemming Nokias market-share declines. With dozens of ways to stream, rip or pirate tracks, the service faces consumers reluctant to pay for music access. Other hurdles include Apples stronghold on audiophiles with its pay-per-song model, the popularity of streaming services such as Spotify and carriers pushing their own offerings.
Analysts view the service, unveiled about 14 months ago and touted as a strong offering by Kallasvuo at the investor meeting Dec. 2, as a test of Nokias ability to respond to consumer demand. Nokias share of the smart-phone market, the industrys fastest-growing segment, fell to 35 percent in the third quarter from 41 percent, while Apples iPhone gained. Nokia has tumbled 86 percent on the Helsinki stock market since it peaked at 64.88 euros ($95.06) in June 2000.
Crowded Market
Sold in 15 countries, Nokias Comes With Music has clocked more than 10 million downloads in both Mexico and Brazil, two of its most successful markets. Spokeswoman Arja Suominen declined to provide overall numbers. Apple had 100 million downloads after iTunes had been open for about the same time, and has sold more than 8.5 billion tracks since starting in April 2003.
Espoo, Finland-based Nokia is counting on music, maps, e- mail and media to increase the appeal of its smart phones. In addition to Apples iPhone, Nokia faces competition in this segment from Research In Motion Ltd.s BlackBerry, Samsung Electronics Co.s devices and Motorola Inc. Google Inc., the most popular Internet search engine, is also developing a mobile phone that uses its Android operating system, making the market even more crowded.
Nokia is rolling out more phones with bundled services, aiming to get 300 million service users by the end of 2011. As of Dec. 11, it had 79.4 million. Nokia last month began shipping the X6, its first phone sold only with a Comes With Music package. Its next phone with the package will be the 5235, with a suggested price of 145 euros.
Pricing Confusion
“We have received some great user feedback for the service,” said Liz Schimel, head of global music at Nokia. “We take a long-term view of Comes With Music rather than seeing it as a short-term promotion.”
Nokia says downloading the top 100 albums on Apples iTunes would cost 934 euros plus the cost of the device, compared with an all-inclusive 450 euros for the X6.
“Its a complicated message to send to consumers,” said Paul Brindley, chief executive officer of Music Ally in London, which researches the digital music industry. “Buying access to the service is quite complex and quite hard to understand.”
A Disaster
Nokia undermined the service in its first year with poor handsets and confusing marketing, said Ben Wood, an analyst with market researcher CCS Insight. Advertising for the service was “colorful but oblique,” he said, adding that Nokia should have shown someone buying a truckload of CDs for next to nothing.
Nokia also stumbled in requiring customers to buy specific handsets to get the unlimited music downloads, analysts said.
“Its been nothing short of a disaster,” said Steve Mayall, a director at Music Ally. “It was poorly executed and there was also a general level of disbelief of having unlimited music on a handset for one price.”
Universal Music Chief Executive Officer Doug Morris said while building the cost of music into the product is a good idea, Nokia may not have been as good as Apple with the device.
Carrier Competition