Now that the launch of the new Macbooks is out of the way, it might be time for Apple to take a look at iTunes and its digital-music-service strategy.
Nokia, the world’s largest manufacturer of mobile phones, is nipping at Apple's heels and mounting what could be the biggest challenge yet for iTunes and Apple's dominance in digital music services.
The first of Nokia's phones, the 5310 XpressMusic featuring "Comes With Music," a subscription service that offers a year of free unlimited music downloads, will be available to consumers in the United Kingdom starting Thursday. After a year, users will be charged for the service, but will be allowed to keep all the music they already downloaded.
Over the next two months, two more Nokia phones featuring the new service are expected to hit the market.
Nokia's entry into the digital-music-services market could force Apple to change its iTunes strategy, say analysts.
Its focus on digital music is a bid to grab a share of the $3.05-billion digital-music-sales market and take a shot at Apple, whose iTunes is the market leader. Nokia is betting that it will add millions of new users worldwide for its new music service over the next year-and-a-half.
"There is no getting away from what is happening here, which is a strategic battle with Apple," says Mark Mulligan, vice president at Forrester Research, UK. "Apple opened up a competitive battle on Nokia's turf with the iPhone, and Nokia is doing the same now with digital music."
Agrees Adam Leach, an analyst with research firm Ovum, "It's a very ambitious play. If you look at the picture globally, there are very few companies in the world that have the muscle to take on Apple in this area, and Nokia is one of those," says Leach.
ITunes, which has had more than 5 billion songs downloaded through it in the last five years, has been at the heart of Apple's revival. The service, integrated into iPods and iPhones, has turned Apple from a niche player in the computer market to an industry visionary.
"Apple has a trinity — the iPod, iTunes and iPhone — that is almost unbeatable," says Russ Crupnick, digital media analyst with The NPD Group.
But now Apple has reason to be anxious. Unlike other iTunes competitors, Nokia's Comes With Music will be bundled along with millions of Nokia phones, which makes it significantly different from rivals such as Amazon.com and Walmart that only sell music and not the integrated device-music combination that has given Apple its edge.
That's not all. Nokia is also building a la carte music stores and has the big four of music rights — Universal, Sony BMG, Warner Music and EMI — signed up along with some independent labels.
This is especially worrisome for Apple because its iTunes store has seen little innovation in the last few years. "Apple is leading the market with an out-of-date music store that hasn’t been updated in four years," says Mulligan.
In response to Nokia's strategy, Apple may have to consider options such as expanding the "Genius" feature in iTunes that creates a playlist of songs based on similar musical tastes as indicated by the user, a full-fledged subscription service or iPhones pre-installed with music, says Mulligan.
In order to stay ahead, Nokia was forced to innovate due to changes in the cellphone business, says Mulligan. Penetration of cellphones in many markets in Europe and North America is reaching saturation even as operators are trying to move towards longer contract periods, which slows down the replacement cycle for the phones.
While Nokia continues to make new handsets, the company is also pressing ahead by launching new services to go beyond just handset manufacturing in an attempt to capture a bigger chunk of the global market.
"We are increasingly moving towards a new type of business where it is not good enough to be a hardware or service provider anymore," Trevor Madigan, Nokia's manager of entertainment and communities in the Americas region, told Wired.com. "You have to have more than the sum of the parts."
Earlier this month, it had a splashy launch in the United Kingdom for the Nokia 5800 XpressMusic. The device, priced at €279, is expected to start shipping in the fourth quarter of 2008. Two other Nokia phones, the 5310 XpressMusic (available prepaid through British website CarphoneWarehouse.com at GBP 130) and the N95 8GB (priced at $700), will also have the Comes With Music service.
“For consumers this means they bring the device home, enter the code in the box to register the device and then download as much music as they want for a year,” Madigan says. “The user keeps everything at the end of the year on their PC and can sync it with their phone.”
To burn a CD of the downloaded music, though, users will be charged extra. It’s not music free of digital rights management, but it is free for users who just want to listen to music through their PC or phone.
Nokia is launching the service first in the United Kingdom, where the digital music market is less developed than in the United States. By the first half of next year, it hopes to enter the U.S. market. If successful, Comes With Music will significantly grow the digital music market, says Mulligan.
Currently, the closest comparison to Nokia’s new service can be found in Denmark with telecom provider TDC. The company offers unlimited music downloads through its Play service, and so far it has seen more than 60 million downloads since it was launched in March. “That’s remarkable considering the population of Denmark is about 5 million,” says Mulligan.
Over the last two years Nokia has also made a number of acquisitions in areas including social networking and mapping services. Last October, Nokia bought mapping data supplier Navteq for $8 billion. The focus of the new strategy, however, is music. The market for full-track mobile downloads of music alone is expected to reach $4.2 billion by 2012, says research firm In-Stat.
Nokia's a la carte store, Nokia Music, has been built on acquisitions the company made a few years ago. In August 2006, Nokia bought digital music provider Loudeye and its European distribution business On-Demand Distribution (OD2) for $60 million.
Nokia says it will grow faster than iTunes because its music services will be launched globally. “Some of our competitors took five years to get to 15 or 20 markets,” says Madigan. “We plan to bring this to every major market region in a global way in the next two years.”
Roadblocks in Nokia's global domination plans include the U.S. market, where the company isn't as dominant as in Asia or Europe, communicating how Comes With Music works and building partnerships with telecom carriers.
"American consumers want ownership, flexibility and portability," says Crupnick. "That's what Apple provides, and while iTunes hasn't fundamentally changed over the years, it is a music vault for most users."
And while the music service itself will be free, downloading over the air carries additional charges from the service providers — that is, if Nokia can convince enough telecom carriers to come on board.
So far, the company hasn't announced any carrier as a partner. Though speculation has it that 3, the service from Hutchinson Whampoa, could be the first to sign on.
Ultimately, how successful Nokia is hinges on building partnerships with telecom operators, says Leach.
And when it does have those partnerships in its bag, Apple needs to be ready to go to battle.
Source : http://blog.wired.com/
Nokia, the world’s largest manufacturer of mobile phones, is nipping at Apple's heels and mounting what could be the biggest challenge yet for iTunes and Apple's dominance in digital music services.
The first of Nokia's phones, the 5310 XpressMusic featuring "Comes With Music," a subscription service that offers a year of free unlimited music downloads, will be available to consumers in the United Kingdom starting Thursday. After a year, users will be charged for the service, but will be allowed to keep all the music they already downloaded.
Over the next two months, two more Nokia phones featuring the new service are expected to hit the market.
Nokia's entry into the digital-music-services market could force Apple to change its iTunes strategy, say analysts.
Its focus on digital music is a bid to grab a share of the $3.05-billion digital-music-sales market and take a shot at Apple, whose iTunes is the market leader. Nokia is betting that it will add millions of new users worldwide for its new music service over the next year-and-a-half.
"There is no getting away from what is happening here, which is a strategic battle with Apple," says Mark Mulligan, vice president at Forrester Research, UK. "Apple opened up a competitive battle on Nokia's turf with the iPhone, and Nokia is doing the same now with digital music."
Agrees Adam Leach, an analyst with research firm Ovum, "It's a very ambitious play. If you look at the picture globally, there are very few companies in the world that have the muscle to take on Apple in this area, and Nokia is one of those," says Leach.
ITunes, which has had more than 5 billion songs downloaded through it in the last five years, has been at the heart of Apple's revival. The service, integrated into iPods and iPhones, has turned Apple from a niche player in the computer market to an industry visionary.
"Apple has a trinity — the iPod, iTunes and iPhone — that is almost unbeatable," says Russ Crupnick, digital media analyst with The NPD Group.
But now Apple has reason to be anxious. Unlike other iTunes competitors, Nokia's Comes With Music will be bundled along with millions of Nokia phones, which makes it significantly different from rivals such as Amazon.com and Walmart that only sell music and not the integrated device-music combination that has given Apple its edge.
That's not all. Nokia is also building a la carte music stores and has the big four of music rights — Universal, Sony BMG, Warner Music and EMI — signed up along with some independent labels.
This is especially worrisome for Apple because its iTunes store has seen little innovation in the last few years. "Apple is leading the market with an out-of-date music store that hasn’t been updated in four years," says Mulligan.
In response to Nokia's strategy, Apple may have to consider options such as expanding the "Genius" feature in iTunes that creates a playlist of songs based on similar musical tastes as indicated by the user, a full-fledged subscription service or iPhones pre-installed with music, says Mulligan.
In order to stay ahead, Nokia was forced to innovate due to changes in the cellphone business, says Mulligan. Penetration of cellphones in many markets in Europe and North America is reaching saturation even as operators are trying to move towards longer contract periods, which slows down the replacement cycle for the phones.
While Nokia continues to make new handsets, the company is also pressing ahead by launching new services to go beyond just handset manufacturing in an attempt to capture a bigger chunk of the global market.
"We are increasingly moving towards a new type of business where it is not good enough to be a hardware or service provider anymore," Trevor Madigan, Nokia's manager of entertainment and communities in the Americas region, told Wired.com. "You have to have more than the sum of the parts."
Earlier this month, it had a splashy launch in the United Kingdom for the Nokia 5800 XpressMusic. The device, priced at €279, is expected to start shipping in the fourth quarter of 2008. Two other Nokia phones, the 5310 XpressMusic (available prepaid through British website CarphoneWarehouse.com at GBP 130) and the N95 8GB (priced at $700), will also have the Comes With Music service.
“For consumers this means they bring the device home, enter the code in the box to register the device and then download as much music as they want for a year,” Madigan says. “The user keeps everything at the end of the year on their PC and can sync it with their phone.”
To burn a CD of the downloaded music, though, users will be charged extra. It’s not music free of digital rights management, but it is free for users who just want to listen to music through their PC or phone.
Nokia is launching the service first in the United Kingdom, where the digital music market is less developed than in the United States. By the first half of next year, it hopes to enter the U.S. market. If successful, Comes With Music will significantly grow the digital music market, says Mulligan.
Currently, the closest comparison to Nokia’s new service can be found in Denmark with telecom provider TDC. The company offers unlimited music downloads through its Play service, and so far it has seen more than 60 million downloads since it was launched in March. “That’s remarkable considering the population of Denmark is about 5 million,” says Mulligan.
Over the last two years Nokia has also made a number of acquisitions in areas including social networking and mapping services. Last October, Nokia bought mapping data supplier Navteq for $8 billion. The focus of the new strategy, however, is music. The market for full-track mobile downloads of music alone is expected to reach $4.2 billion by 2012, says research firm In-Stat.
Nokia's a la carte store, Nokia Music, has been built on acquisitions the company made a few years ago. In August 2006, Nokia bought digital music provider Loudeye and its European distribution business On-Demand Distribution (OD2) for $60 million.
Nokia says it will grow faster than iTunes because its music services will be launched globally. “Some of our competitors took five years to get to 15 or 20 markets,” says Madigan. “We plan to bring this to every major market region in a global way in the next two years.”
Roadblocks in Nokia's global domination plans include the U.S. market, where the company isn't as dominant as in Asia or Europe, communicating how Comes With Music works and building partnerships with telecom carriers.
"American consumers want ownership, flexibility and portability," says Crupnick. "That's what Apple provides, and while iTunes hasn't fundamentally changed over the years, it is a music vault for most users."
And while the music service itself will be free, downloading over the air carries additional charges from the service providers — that is, if Nokia can convince enough telecom carriers to come on board.
So far, the company hasn't announced any carrier as a partner. Though speculation has it that 3, the service from Hutchinson Whampoa, could be the first to sign on.
Ultimately, how successful Nokia is hinges on building partnerships with telecom operators, says Leach.
And when it does have those partnerships in its bag, Apple needs to be ready to go to battle.
Source : http://blog.wired.com/
