Nokia wants some of Apple’s rhythm. On July 1 the Finnish mobile-phone maker said that Warner Music Group has agreed to participate in Nokia’s fledgling music service, making Warner the third of the major record labels to join in the effort. The move is one more step in Nokia’s effort to compete against Apple for the people who want to carry around music libraries in their pockets.
Nokia’s service, which will officially launch in the second half of this year, is called Comes With Music. It will be built into certain Nokia handsets and will allow customers to download unlimited amounts of music from participating labels. The downloaded music can be kept on a PC or mobile-phone forever. In theory, a consumer could download every single song from the labels’ catalogs; they’d simply need a very big hard drive on which to store the files. Nokia and its partners have not disclosed pricing for the service, but they believe it has plenty of potential. “We believe this will be a significant contributor of revenue over a long-term basis for Nokia,” says Liz Schimel, global head of music for Nokia.
(Almost) All Aboard
The record labels seem to be buying that argument. Universal Music Group in December signed up with Nokia, and Sony BMG Music Entertainment partnered with the service in April. A spokesperson for EMI Group, the sole major label yet to join, says the company is talking with Nokia, although no deal has been reached. Nokia says it is in talks with independent labels as well.
For the music industry, the Nokia venture represents a departure from the old ways of doing business. Susan Kevorkian, program director of consumer markets at research firm IDC, says there is “broader experimentation” as CD sales decline and music revenues slide overall. For record companies, it may make sense to look for new ways to sell the work of their artists. Ringtones, for example, have become a multibillion-dollar business in only a few years. “We have a long-term sustainable business for Nokia, the music industry, and the artists,” says Schimel.
It’s hard to evaluate the service before pricing and other specifics are known. Nokia remained tight-lipped about the details of Comes With Music as it unveiled the Warner Music partnership. But Apple has said that it makes little money on music sales through its iTunes store, instead generating profits from sales of iPods and other hardware. Will the music business for Nokia and its partners also be of marginal financial benefit? Schimel says such comparisons are off-base. “We feel it is apples and oranges,” she says. “We are offering a structure that will attract new customers and new revenues.”
Will It Pay?
Some analysts are skeptical that Comes With Music will help Nokia attract new customers for its mobile phones. James McQuivey, a principle analyst at Forrester Research says, “There won’t be the same rush to buy Nokia phones” as there is for iPhones. Apple is expected to sell 10 million iPhones by yearend. McQuivey guesses that at most Nokia could sell between 2 million and 4 million handsets in the year following Comes With Music’s launch. The amount of revenue the company earns from downloads will depend on how much Nokia intends to charge consumers. But it is sure to be insignificant at a company that made $10.6 billion last year on sales of $75 billion.
IDC’s Kevorkian sees this as part of a bigger move by Nokia and the music industry. “It is a slim revenue margin, but it makes sense as part of a volume play for Nokia, who is in the midst of transition,” she says. Kevorkian sees Comes With Music as fitting into Nokia’s Ovi service, a broad effort to sell services to mobile-phone users.
Still, McQuivey thinks Nokia and its partners may find few takers for the new music service. He argues that music enthusiasts won’t be satisfied with a phone that’s merely adequate for listening to tunes, while other people won’t be willing to pay money for such music services. He says it’s a lot like digital cameras. Some people use their phone as a digital camera, but people taking lots of photos will generally purchase a separate, higher-quality digital camera. “It’s a mismatch in market opportunity,” says McQuivey.
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Steve Jobs’ new iPhone, expected to be unveiled Monday, is headed to Japan by the end of the year. But the device’s famed ease of use may actually be a put off in Japan, where consumers want features, not simplicity.?? Indeed, Japanese handsets have become prime examples of feature creep gone mad. In many cases, phones in Japan are far too complex for users to master.
“There are tons of buttons, and different combinations or lengths of time yield different results,’” says Koh Aoki, an engineer who lives in Tokyo.
Experimenting with different key combinations in search of new features is “good for killing time during a long commute,” Aoki says, “but it’s definitely not elegant.”
Japan has long been famous for its advanced cellphones with sci-fi features like location tracking, mobile credit card payment and live TV. These handsets have been the envy of consumers in the United States, where cell technology has trailed an estimated five years or more. But while many phones would do Captain Kirk proud, most of the features are hard to use or not used at all.
“Some people care about quality, but first and foremost it’s about the features,” says Nobi Hayashi, a journalist and author of Steve Jobs: The Greatest Creative Director. He estimates that the average person only uses 5 to 10 percent of the functions available on their handsets.
Japan is a culture of spec sheets. When consumers go to electronics stores to buy a cellphone, they frequently line up the specifications side by side to compare them before deciding which one to buy.
Hayashi owns a Panasonic P905i, a fancy cellphone that doubles as a miniature but crisp 3-inch TV. In addition to 3G and GPS, the device has a 5.1-megapixel camera and motion sensors that enable Wii-style games to be played sitting on the train.
“When I show this to visitors from the U.S, they’re amazed,” Hayashi says. “They think there’s no way anybody would want an iPhone in Japan. But that’s only because I’m setting it up for them so that they can see the cool features.”
In actuality, Hayashi says, the P905i is fatally flawed. The motion sensors are painfully slow, and the novelty of using them is quickly replaced with frustration. And while being able to watch TV anywhere is a spectacular idea, there’s no signal in the subways, and even above ground, the sound cuts out every few seconds.
“There’s nothing more annoying than choppy TV noises,” Hayashi says.
Aoki, who carries two phones, a Sony W44S and an iPhone for accessing the web, has only a vague idea of all the things the Sony cellphone is capable of doing. “Every once in a while, you find an incredible function via the complicated menu,” he says.
The manufacturers, who realize the absurdity of piling on features that don’t work well, are caught in a vicious cycle of materialistic consumers who always want the newest high-tech handsets, and carriers that have complete control over what products and services are provided to their customers.
“The most important thing for us is to provide our end users with a unique user experience through our products,” says Toshi Kawamura, a spokesman for Sony Ericsson Japan.
They’re also at the mercy of the all-powerful carriers, like NTT DoCoMo — the company that created the localized 3G network that makes Japanese handsets virtually obsolete in the rest of the world — who get to decide what applications and functions are compatible with their networks.
“The flashy little functions are cool, but they’re carrier-specific,” Hayashi says. “Once you take this out of Japan, it’s just a piece of metal.” Japanese companies only make 5 percent of global mobile phone sales, and all of those sales are domestic.
Neat-looking gadgets are also a core aspect of one’s identity. Daiji Hirata, chief financial officer of News2u Corporation and creator of Japan’s first wireless LAN, admits to changing handsets more often than is probably necessary.
“Cellphones are always part of any conversation,” he says. “People are always using them and holding them, even in the middle of a meal, so they might not think you’re hip if you’re carrying an old one.”
However, it’s unclear whether Japanese consumers will ditch their complicated cellphones for Apple’s easy-to-use iPhone, which will be sold in Japan by SoftBank by the end of the year.
A survey conducted by Japan Railways showed that just more than half of those polled were interested in buying the iPhone, but that less than one-fifth really knew what the iPhone was.
“It doesn’t have 3G, the camera is only 2 megapixels, and it lacks fun little features like mobile wallet functions and an LED flashlight,” Hayashi says. “It may sell modestly as a smart phone or as an upgraded iPod, but it’s not quite cutting it as a competitor in our mobile-based culture.”
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Apple has started offering movies for sale or rent to UK users of iTunes.
More than 700 titles will be on offer from the launch date, 100 of which will be available in high-definition.
Many of the titles on sale for downloading via iTunes will be going on sale on the same day they are released on DVD, said Apple.
New releases cost £10.99 to buy and £3.49 to rent. Movies from the iTunes library cost £6.99 to buy and £2.49 to rent. HD versions cost £1 more.
Those renting films have up to 30 days to watch what they have downloaded and once they have started watching it have 48 hours to finish viewing.
Once downloaded films can be watched on an iPod, iPhone or through Apple TV.
Apple said films from Fox, Disney, Paramount, Warner, MGM, Sony International and Lionsgate would be available via iTunes.
Early titles available for download include I Am Legend, National Treasure 2, Hitman and Into The Wild.
ITunes in the US started offering movies for sale or rent in early 2008.
In the online movie watching market Apple faces competition from rivals such as Amazon, Netflix, Blockbuster and even Microsoft via its Xbox 360 gaming console.
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