Nokia the Next to Try an iTunes Killer?

fragmentate writes "Nokia recently acquired Loudeye Corp., a digital media distribution channel, presumably to offer streaming media to providers and their customers. BusinessWeek is speculating, 'the company may be seeking to go after none other than the 800-pound gorilla of the digital music world, Apple Computer. [...] Yet the Loudeye brand is virtually unknown when compared with that of Apple's hugely popular iTunes service. This gives carriers the chance to market their own brand instead, says P.J. McNealy, an analyst with American Technology Research.'"

Comments

Somewhat strange reasoning

[chriss]

Simply quoting the article

Nokia has already tried to enter the music area

Last October, O2 Germany launched its music store, the first wireless music store based on Nokia's and Loudeye's technology. Still, the joint effort didn't gain as much traction as Nokia expected, analysts speculate.

Nokia also tried to become a content provider, only to be rejected by the carriers:

Already, Nokia tried selling ringtones, games, and other services through its own portal, Club Nokia. In response to carrier complaints, Nokia eventually stopped selling software via Club Nokia and converted the site into a customer community and service hub. If Nokia offered its own music service, "the carriers could react extraordinarily negatively," says Andrew Cole, an analyst at consultancy TNMG-Adventis. "They could lose revenues because of this."

So they will enter the music distribution area, but not competing with the carriers. Instead they will use Loudeye to compete with iTMS, making you download the music to your computer and then to your phone?

Thanks to the Loudeye acquisition, Nokia might have the technology and content components it needs to effectively compete with iTunes. After all, Loudeye has a catalogue of 1.6 million tracks and has more content rights to local music globally than any other music distributor in the world--including iTunes.

And why? To sell more phones?

A struggle between them would certainly be an interesting match-up. Apple sold 22.5 million iPod players in its fiscal year 2005 and could approach 50 million units by the end of 2006. But Nokia moved 265 million units in its most recent fiscal year, 40 million of which were capable of playing music.

But 100% of the 22.5 million iPod buyers bought it to listen to music. Most of the Nokia buyers bought it to make phone calls.

I'm not sure what Nokia is doing with Loudeye, but believing that they intend to attack Apple + iTMS directly instead of doing something with wireless music distribution seems pretty far fetched.

Re:Nope.

[iPodUser]

I agree - All we hear these days is "OMG Microsoft is gonna kill apple" "Did you hear [Industry player] is gonna destroy the Ipod!". With Apple having Dominated the Market for a while now, I don't think we will see an "iPod Killer". Instead, steady education of consumers, combined with new and innovative products being brought to market, will slowly erode Apple's supremacy and bring balance to the force.

As one of the original developers...

[Renesis]

I remember when OD2 was 3 guys in a bedroom, and I was one of them.

The main failure I see in OD2's business model was that it ran a "white label" system. It powered the music stores for brands that didn't give a shit about music. Packard-Bell is a great example. They barely give a shit about building computers, but they know even less about music. Wanadoo (now Orange) was (is?) one of the biggest customers, but again - what does an ISP care about music? Nothing. So none of these partners really cared about their music portals or did anything with them. They just let them rot away.

MSN is the biggest customer in terms of users, but they never really cared enough to do anything useful - and they showed just how much they cared when they started installing big Flash ads all over their site. The ad revenue probably brought them more than the music ever did.

Apple made the right decision by building a single brand. Of course, this requires some serious marketing outlay which white-labelling doesn't (your partners spend the marketing beans), but in the end produces a much richer experience IMO.

Why does Coca-Cola need it's own music store? It's a trick question - they don't. Coca-Cola had their own store built around OD2's platform, but now they've abandoned it and just have a page inside iTunes. THAT is a better combination of brands.

OD2 Loudeye also pissed their money away buying OverPeer. I kept asking the Korean tech guys - "How will you keep getting more IPs as your servers get blocked?" "Ah, it's our secret" they said. I never did find out their "secret" for all the good it did them. Never start a war against the hardcore pirates on the Internet. They're cleverer than you. And plus, they're 12 years old and have far too much disposable time to fuck you up.

Am I surprised Nokia bought OD2? A bit. I worked on the N91 project with Nokia a couple of years ago, back in the days when they were pissing themselves with fear over a Apple/Moto iPhone which still hasn't *really* arrived. The idea of Nokia phone which does music is fairly sound - the main idea of course is that you cut out the PC element. You buy and download the songs straight to your phone (and you can sync them back to your desktop too if you want). The spanner in the works, as Apple found to their detriment, is the networks. Apple tried to do it without the networks and they demanded their cut. They want a chunk of every track sold. The problem is, Apple (like all the other music stores with fixed pricing) only makes a couple of cents on most tracks - there is no room for a cut for the networks. And the networks need to pay for all that bandwidth you'll use downloading your songs.

What have Nokia actually bought? 5 pieces of paper. The contracts with all the record labels (majors + indies). I wouldn't be surprised if that was all they really wanted from the deal. It saves them a whole bunch of work in negotiating contracts and paying royalty advances.

Do I think Nokia will succeed? Maybe. I've been inside the belly of the beast though. Nokia have gone seriously downhill in recent years. The quality control on their software is shoddy. Their desktop software has always been horrendous. A lot of their software design is outsourced. Internally their organisational structure seems to be dragging them down. I really don't hold out much hope.

My money is on Apple. They have everything, end-to-end. If they really are building their own phone from scratch with their own UI then they'll end up winning this game. The only thing they lack compared to Nokia is the relationships with the mobile networks, but money can solve that problem - as Apple have hinted previously about setting up their own virtual network.

Caveat: I'm a OD2 Loudeye shareholder. My shares are barely worth the paper they're written on :)