Phone
Nokia, the worlds largest mobile-phone maker, is still working on deals with Hollywood studios to offer movie and TV downloads to users around the world. Apple already has a catalog of more than 5,000 films, and now Samsung Electronics Co. and Sony Ericsson Mobile Communications Ltd. have also started download services.
Video is playing a bigger role when customers select phones as sharper displays and increased storage space make movies look better on handsets. Profit margins on smart phones that can play movies and send e-mails can be 10 percentage points higher than standard devices, and Nokia needs to beef up its offerings with film deals or risk losing market share and crimping earnings.
“Nokia is behind Apple if youre looking to watch video, download from YouTube and so on,” said Roland Pitz, an analyst at Unicredit SpA in Munich with a “hold” rating on Nokia shares. “If I buy a smart phone, I want to have content, and content is movies, video, pictures on Facebook, everything.”
Smart phones are the fastest-growing segment of the market, with sales estimated to increase 27 percent to 170 million units for revenue of $57 billion this year, according to researcher Gartner Inc.
Rising Popularity
Video will become as popular as music, said Michael Walkley, a Piper Jaffray & Co. analyst in Minneapolis. Sony Ericsson said customers make close to 100,000 downloads a month in the European countries where its service is offered.
“People will watch films a piece at a time while commuting or waiting,” said Shashi Fernando, chief executive of Saffron Digital, which powers Sony Ericssons service and is piloting The Vid Store, a third-party download store for Nokia phones in the U.K.
Nokia has made room for movies in its online Ovi Store, which currently has film trailers, comedy clips and Japanese cartoons known as manga. Nokia lost ground in smart phones in the past two years as users bought Research In Motion Ltd.s BlackBerry, which offered smoother integration with corporate e- mail, and then the iPhone with its content library.
Nokia has dropped 20 percent this year in Helsinki trading, including its biggest one-day loss in five years after trimming its profit margin forecast in July. Apple has doubled on the Nasdaq Stock Market this year.
Trial Stage
The Espoo, Finland-based company is working with studios including Fox and Paramount Pictures on securing content, and will offer “mobisodes” of the TV series “24,” Marco Argenti, vice president for media services, said in an interview in May.
Samsungopened a download service in March with 1,800 titles from studios including Paramount and Warner Bros. Viewers in the U.K. can rent the “Mission Impossible” and “Harry Potter” movies for less than $5 each or buy them for about $18. Samsung hasnt yet offered the service in the U.S.
Samsung wants to boost the value of its hardware, not make money from downloads, Vice President Kenny Lee said from Seoul. Samsung has deals to stream Blockbuster and Netflix videos to TVs in the U.S. and plans more video partnerships, Lee said.
Sony Ericsson bundles free access to 60 movies a year with its W995 phone and plans an expanded download service later. It mainly showcases titles that studios will let go for lower prices, such as “Kung Phooey” and “Jackass 2.5.” Sony Ericsson declined to comment on payments to studios.
Growing Market
Digital movie revenue for online stores in the U.S., including computer downloads that can be transferred to handsets, may grow to more than $1 billion in 2013 from about $215 million last year, said Dan Cryan at London-based video analysts Screen Digest.
Studios get paid when a movie is downloaded and their cut varies according to how new and popular the film is, said Leslie Golding, a founding partner at Acetrax AG, the content aggregator that built Samsungs store.
Most revenue from films sold by phone makers ends up with studios, as handset makers are willing to sell movies for less than they pay to studios, according to Screen Digest.