Music ’n boots always sell well
So, as I was saying, the biggest news in cellphone news this month was not the new Nokia touchscreen Tube, the Finnish company’s answer to the iPhone, but its new Comes With Music service.
This initiative, announced last year, is the gutsiest gamble seen in digital music, well, since Apple opened the iTunes Store. Every new Nokia will be able to download from a catalogue of millions of songs from the major record labels for the first year for free – and then keep those songs afterwards.
The big music labels are in turmoil. Last year CD sales were down 20 percent, not bringing in 2-billion worth of revenue. Meanwhile digital music sales only increased by 500-million. They had to do something.
I’ve long thought that the hidden strength in Apple’s iPods is the ease of use of iTunes, its jukebox software. Technology revolutions need the means of production as much as anything else – and iTunes was the first, and to my mind still best, means of converting old technology (CDs) into new (MP3s or digital music). Apple added the means to make this music portable, with the ultra-slick, can’t-live-without-one iPods. Cellphones are the only thing more popular and are increasingly morphing into iPod replacements, as well as digital camera and GPS equivalents.
Nokia has realised this and by making digital downloads possible direct to their handsets, it will ensure that more people buy their phones. Nokia sells 40 percent of the world’s cellphones, some 400-million a year; while Apple is hoping to sell 10-million iPhones this year, less than 1 percent of the over 1-billion cellphones expected to be sold in 2008. Nokia clearly aims to keep it there by including this value-add for the youthful, music-centric market.
If you’re in that key 15-35 age demographic and you’re thinking what new phone to get, do you choose the same Sony Ericsson or Samsung or a Nokia which comes with free music?
(Of course, you pay for the bandwidth, but at the cheapest bundle rate of 20c per megabyte (MB) the average 3MB song will cost you 60c to download. Where can you buy digital music for that little?)
Nokia scores because it sells more cellphones. Worked for Apple. Steve Jobs’ mastery was in first convincing Big Music to even sell their songs and then at the ludicrous one-size-fits-all rate of 0.99. But his true mastery was in deluding this hungry record labels into thinking he was selling their music, when in fact he was selling his iPods. He inverted the razor blade model, which sells you a cheap razor but expensive razor blades. A bit like printer companies and inkjet printers.
But Jobs virtually gave away the blades, passing on most of the profit to the record labels, and sold pricey, albeit desirable, iPods.
Nokia is doing the same. Executives have been muttering to me for years about the pain at waiting for networks to introduce music downloads. The networks couldn’t work out how to make money from both selling the bandwidth and selling the content using the Apple model.
Nokia got tired of waiting and decided to change the business model by doing it themselves. The networks win because Nokia owners conceivably use more data thereby increasing their spend. You can be sure it’ll work – in the way the iTunes and iPod link up works.
Cellphones are poised to do to media players what they’ve done to digital camera sales. First Nokia became the largest seller of digital cameras by virtue of including them in their cellphones, then the largest maker of MP3 players and recently overtook the top GPS manufacturer.
There was this great story about how a Finnish newspaper tracked down one of the oldest Nokia shareholders during Nokia’s early 1990 boom years as cellphone sales exploded. This elderly fishman had bought shares when Nokia made inter alia wellington boots and sea cables. As the newspaper reporter asked what he thought of his modest investment now worth millions and what prescience he’d had to invest in the first place, the old man replied “you always need rubber boots”.
END NOTE: Shapshak is editor of Stuff magazine. His last Nokia was the immortal 6310i.
Nokia Comes with Music discussion
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