The talk of today’s Nokia World Show is ‘Comes With Music’, the freshly announced partnership between Nokia and Universal Music Group, which will be a subscription based music download service.
Rob Wells, senior vice president for digital at UMG, got up on stage this afternoon to explain the thinking behind the deal, and gave some more details.
THE EXTRA DETAILS
– “The brand of the service will be free, so it may well be a free subscription. Our revenues will come from the sale of the device.” In other words, it is UMG’s Total Music idea, where the device manufacturer subsidises the music listening of the user. It’s not free – because UMG is still getting paid – but it’s Nokia footing the bill.
– There’ll be no monthly limits on how many songs you can download from Comes With Music. “With two million tracks available, it will take you close to five and a half years downloading non-stop 24 hours a day to get them all.”
– The usage rules will let you play Comes With Music files back on your PC, or on the mobile that activated your subscription. What happens if you upgrade or lose your handset? “It’s primarily a question for Nokia, but in terms of this Universal deal, there is a three phone allowance within the 12-month subscription period.”
– It’s music only at first, but “it’s not rocket science to extend the deal to include video as well in the future”.
– UMG is looking to sign similar partnerships with other companies, including device manufacturers but also car makers and ISPs, potentially. Which makes me wonder if UMG effectively gets paid three or more times for the same user.
– DRM is a big part of Comes With Music, and Wells was bullish about the reasons why. “If we are moving into the subscription or access business, and you’re not earning revenues on a per transaction basis, we have to track usage through the service, so we can pay the artists. DRM has become a badge for industry commentators, or a stick to beat up the major labels. But subscription cannot exist without DRM, as long as you’re paying your artist.”
THE THINKING BEHIND IT
– “In the minds of some journalists, the world begins in Cupertino and ends in New York. Not fair. 60% of all music is sold outside America, and Japan is the second biggest market. In light of that, bear in mind that the single biggest digital store in the world isn’t iTunes; it’s Label Mobile, a full-track to mobile store in Japan… The only territory showing growth [for UMG] is Japan now, and that’s where 95% of consumers consume music using mobile phones.”
“I believe that consumers consume music in one of three places: in the home, in the car, or in their hand. By tapping into business partners in any one of those three areas, and striking a deal where we earn revenue from access to the music, rather than on a per-transaction basis, we will arrest the revenue decline in developed markets, and stimulate growth in developing markets.”
– “It’s long been said that subscription is the answer to all our prayers. I firmly believe that in two to three years time, consumers will be accessing music as part of a bundled price either for a device, an operator subscription, when they buy a satnav device for their car, a media centre for their home…”
– “Under this model, the concept of ownership disappears. The 18 year-old in his room surrounded by pizza boxes who boasts to friends that he has 45,000 ripped files on his hard drive suddenly becomes deeply uncool. Friends will say you can get them as part of the two million tracks on Comes With Music or AN Other service. Consumers will naturally gravitate towards this model, and away from the standard a la carte model.”
THE UNANSWERED QUESTIONS
Wells’ presentation certainly gave an insight into the thinking behind the partnership, and some nuggets of information. But there’s still some unclear aspects:
– What happens when your year subscription runs out? Nokia and UMG made it clear that you’ll keep all your downloads, so that’s fine, but what if you want to subscribe again? How much will it cost you?
– Comes With Music is likely to revolve around Nokia’s Nseries handsets, which are the same phones being targeted by the Nokia Music Store. Won’t Comes With Music kill the music store off, in that case? And if so, why did Nokia spend so much time and money developing it?
– Will Comes With Music handsets continue to be subsidised by the operators (e.g. you’d get one free on a contract), or will it be restricted to just SIM-free models at full price?
– How does the business model work if more labels join the service? Say Nokia is paying UMG $5 per user per month (one of the figures that’s been bandied around). What happens if, say, EMI joins in a few months time – what share do they get? And could revenue wrangles stop Comes With Music from signing up all the major labels plus the independents?
– When is it going to launch?
For the latest posts from the show, check our Nokia World 2007 category