Nokia’s Warning Sounds Bad for the Music Business
by Peter Kafka
Posted on November 14, 2008 at 11:22 AM PT
Mobile giant Nokia’s dire warning today–its fourth-quarter sales will be below expectations, and it sees the overall industry contracting in 2009–didn’t just scare investors in mobile/wireless stocks. It also discouraged beaten-down executives in the music industry, who have been hoping that the mobile business will help them crawl out of a very deep hole.
That seemed plausible a few years ago, when consumers embraced the ringtone trend and shelled out $2.50 to buy a couple seconds of music for their phones. But trend is the operative word here–ringtone sales have been flattening for some time. And hopes that consumers would use their phones to buy music over the air via iTunes-like stores haven’t panned out, either.
New plan: Tether music sales directly to the sale of mobile phones, via bundling plans like Nokia’s “Comes With Music.” That program, which just launched in the U.K. last month, makes an interesting proposition: Buy a $229 Nokia handset, and you can download as much music as you want from the big labels–Warner Music Group (WMG); Sony (SNE); Vivendi’s Universal Music Group and EMI Music Group–for a year.
If that works, it’s a double win for the business: It gets consumers to actually pay for digital music and it gets them to pay via an outlet that’s not Apple’s iTunes, which is a big deal for an industry trying to reduce its dependence on Steve Jobs and company.
But it only works if people are actually buying new phones, period. And Nokia (NOK) is now saying that looks a whole lot less likely for the foreseeable future.
Follow Peter on Twitter | Follow AllThingsD on Twitter
Comments
Peter, the Nokia offer is not attractive to the addressable market for this device unless it includes music from Indie labels.
The days when signing a deal with the majors meant that you’ve met the needs of music consumers has come and gone.
Apparently no executive on the Nokia team asked their teenage children if this was really an attractive offer.
Posted by David H Deans at November 15th, 2008 at 4:53 amSomeday, the music industry may learn (if it exists that long), if it ain’t iTunes, it don’t pay … or play!!!
Posted by Scott Burkett at November 15th, 2008 at 7:06 pmNokia is just receiving its deserved karma for being so cocky. Maybe it should try producing a first-rate piece of hardware for a change, and then couple it with some real software, for a change, and less fear would be had regarding 2009.
This isn’t as big a deal as you think, Peter. 2009 wasn’t going to be a big revenue year for Comes With Music. 2010 maybe. It’s an experiment at this point. A slowdown may reduce subscription purchases in the near term but it doesn’t stop the experiment. Vivendi’s CFO downplayed expectations during the recent earnings call because it isn’t expecting much revenue next year from CWM. It’s still a few years away from amounting to much. It is likely that CWM will be ready for widespread adoption when the economy takes a turn for the better.
Posted by Glenn Peoples at November 16th, 2008 at 9:37 amnokia’s phones are generic garbage, this is not an industry moment
Posted by Sam Harrison at November 16th, 2008 at 7:19 pm