Nokia’s “Comes With Music,” Comes With A High Price
By Tricia Duryee - Mon 28 Apr 2008 08:58 AM PST
As Nokia (NYSE: NOK) prepares to launch one of the more innovative ways to sell music on a mobile phone—by including free and unlimited downloads for a year—the company will pay for it dearly, reports The Register. Rumors had been circulating that the handset manufacturer would be paying up to $35 a handset to Universal, which was the first to sign up when Nokia launched the “Comes With Music” initiative last December. Since then, Sony (NYSE: SNE) BMG has joined. The Register reports today that Nokia is paying a high price to be innovative. It supposedly will be paying the wholesale per-unit rate for downloads over a certain ceiling (believed to be 35 songs per user). The article doesn’t say what that wholesale rate it is, but if the retail is 99 cents, we are talking a lot of money potentially if users actually embrace the idea and download freely.
It’s a risky move, and if the report is correct, it looks as if Nokia doesn’t know how to handle it. Apparently, Ed Averdieck, formerly Managing Director of Nokia Music, has left the company and Tommi Mustonen, former head of Nokia Multimedia, has been given a “punishment that fits the crime”, which means he must negotiate the deals with labels personally.
Recently, Nokia rejected the pricing reports that it was paying up to $35 a handset, telling IDG that it “is not true. We are not paying that amount to any record label.” But it also appears the company was replying to reports that the fee would be paid for every handset, which is not the case. The company has repeatedly declined to provide any specifics.
Of course if the Register is correct, there could always be another contingency, like volume discounts, or on a limited number of handsets that wouldn’t make it so dire. At CTIA, where Tero Ojanpera, Nokia’s EVP of entertainment and communities spoke, he said Comes With Music is a business for Nokia, it’s not about selling more devices. “It has to be sustainable,” he said. “There has to be money to be shared, and we will share with the partners involved.”
Posted in: Companies, Music Labels, SonyBMG, UMG, Nokia, Entertainment, Mobile Music
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