Nokia fights for space in mobile music

The already crowded digital music market is about to become even more competitive with Nokia’s plans to bring its Comes With Music (CWM) service to Asia.

Digital music has become a big business globally, with iTunes leading the way. But Apple’s foot-dragging in extending its service to Asia has left the door open to other players - and there have already been plenty of attempts to fill the void. In Hong Kong alone, for example, mobile operators SmarTone-Vodafone, PCCW and 3 have launched subscription-based download services. Motorola, meanwhile, has been extending its Moto Music platform into Southeast Asia after buying music firm Soundbuzz. Can Nokia, which launched CWM in the UK last week and will extend it to Singapore and Australia next year, find its own niche?

The USP is unlimited, DRM-protected downloads from the ‘big four’ record labels and some market-specific smaller labels through Nokia’s PC-based Music Store. The cost of a year-long subscription is bundled in with the purchase price of a selection of music phones - three models were announced with the launch in September - and downloads can be synched between a player called Nokia Music and the handset. When the subscription expires, the music can still be played on either handset or PC. A new subscription means you can keep buying new tracks.

One issue in Asia particularly is music piracy. However, John Goeres, Deloitte’s regional director of Southeast Asia for telecom, media and technology consulting, says there is enough revenue in the fractured mobile download segment to go around in Asia, a market that already accounts for 40 per cent of spend on music downloaded to mobile devices. “Although there is a large part of the market that still downloads music illegally, piracy is always going to be a problem,” he says. “What the iPhone shows is that there is a critical mass of consumers out there who want to do the right thing. The pie isn’t as big as it should be, but it is big enough.”

With a touch-screen handset in the pipeline, a music organiser that draws heavily on the iTunes experience and an online music store, Nokia seems to have adopted an attacker strategy against Apple to gain share from the iPhone/iPod/ iTunes triumvirate, Goeres says.

The company’s rush into music downloads also pits it squarely against the mobile operators it has to work alongside in its handset business. Eric Mallia, marketing director at SmarTone-Vodafone, says CWM is not a threat to SmarTone’s subscription-based MusicXS service and disagreed there was a “war” between handset manufacturers, content providers and the cellcos. “There isn’t going to be winner and loser in all of this. It is more symbiotic,” he says. “The operators need handsets and vice versa. There is ample business in music downloads and other domains for the operators and their vendors to grow.”

Mallia is confident the offerings are differentiated and if Nokia’s CWM is launched in Hong Kong, he believes revenues of its MusicXS service will not suffer.

However, Goeres predicts a rationalisation in the next few years. “This has created a new business model, essentially,” he says. “Over the next two years, the segment should consolidate and I would expect at least two players to emerge from consortiums.”