Ronnie05's Blog

Nokia’s free ‘Comes with Music’ gambit: A game changer or a minefield?

Posted in Mobile Devices and Company Updates by Manas Ganguly on April 14, 2010

After free navigation, Nokia unveils its Comes with Music free in China. It is an interesting move and will depend on Nokia’s ability to raise monies from increased device sales, subscriptions (after the first year) and the ability to make money through advertisement revenues on mobile.

On 8th April 2010, Nokia Comes with Music (CWM) was launched in China. The highlight was Unlimited DRM free music for one year and no premium on handset price. Initially the service is tied to the handsets Nokia X6 32Gb, X6 16GB, 5230, 5330, 5800w, 6700s, E52 and E72i and offers unlimited music downloads for one year.

The CWM launch in China is in significant difference with other CWM launches world over because the CWM phones are being priced no higher than the standard models, Music tracks are DRM free and the service has one click activation.

Of Nokia’s CWM effort:Nokia’s CWM effort now has a music store in 33 markets globally, 21 device support, 25 operators supporting it with a catalogue of 9.5 million tracks and a partnership with a whole lot of music providers. While these stats sound impressive, the CWM launches have been shaky so far. However the saving grace for Nokia are markets such as Singapore, Russia, Brazil and Indonesia.

Reading the consumer:Nokia claims that users download about 500 tracks in the first few weeks and then settle back to lower level of usage. Nokia also reports that a vast majority of users treat unlimited access to millions of tracks as a freedom and it leads to experimentation with new genres and artists and more responsibility (rather than downloading all they can).Nokia believes that the CWM in all its successes and failures, will be the next business model and will create mass market opportunity for the music industry.Even though China has a reputation for being large market for pirated content, Nokia believes that CWM represents an opportunity for it and music industry will develop a market for high quality, legal. DRM free content.

CWM I versus its current avatar:The new Music store is a complete re-hash of its predecessor with important add on features such as being played directly from the browser instead of the Ovi Player PC software or the phone and improved recommendations, opportunities for cross promotion and concert information, ticket sales and advertising. These new features help bring Nokia’s CWM closer to the iTunes 9. It also opens up the door to indirect revenue streams. It is noteworthy that Nokia also followed the same “make it free” route for its Ovi Maps service. The idea behind it was to have a higher level of service adoption and then drive indirect revenues through the user volumes. Noteworthy here again is that Nokia had bought over Metacarta to compliment its efforts in the GPS maps scene and it also acquired Novarra to augment its efforts to create a better service delivery to the user through better mobile browser and service platform.

Thoughts behind the move: What can be inferred from the moves made by Nokia is that as with maps and navigation, Nokia is making the Music service free of charge early in order to build a large community of users on which it will build its indirect revenue. Thus in the short terms Nokia would take a hit on its profits (in China), unless the handset sales because of this bundle increase dramatically. The financial markets have been skeptical of the value of Ovi services to Nokia. Nokia will soon have to come up with some convincing numbers to avoid the argument that it doesnot know how to milk profits from its service strategy.

The next market for the CWM release intuitively appears to be India. However, I would believe that Nokia would study the free CWM model in China for at least a quarter before launching into India.

Endlines

Free CWM echoes decision to offer free navigation on Ovi Maps. To make this strategy work, Nokia will need to find other revenues, be that advertising , other services or more handset sales. Further DRM free deployments could follow in markets such as India, where like China, high levels of piracy would make this offer palatable to record labels.

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