Brainstorm Magazine

Sharing: Nokia’s Jake Larsen says the company wants to take music to the masses.

The world’s biggest handset maker is not surrendering. It wants to be the way you consume and experience music.

With all the hype, you’d think Apple’s iPod was the world’s runaway winner as a music player. Enter Nokia, stage left.

It won’t concede the race is over. In fact, Nokia claims it has shipped more digital music players than anyone else. It is somewhat of a Trojan horse strategy. Nokia, Sony Ericsson, Samsung and other handset makers have been shipping phones capable of playing music for years. In fact, Sony Ericsson has even revived its Walkman brand, to name a line of phones.

However, it has not been easy to use phones as mobile music players. And there has not been a local destination designed for mobile phones where users could buy digital music. Couple this with the fact that only a single segment of the music industry is growing, taking a larger slice of a shrinking pie: mobile music.

A report out from Juniper Research, based in the UK, says paid-for full-track downloads will drive most of the growth over the next five years.

The report estimates revenue from mobile music will rise to $14.6 billion worldwide by 2013, from $11 billion last year. Full-track downloads (and streaming services) will account for $5.5 billion of this total.

The challenge of socialism At the core of Nokia’ plan to make music more social is its “recommender” function. This allows you to tell your friends about albums and songs, as you discover them. “Social media will without a doubt be important in how people discover music,” says Larsen. “Social music is the future.” He adds: “We all like to share experiences, music forms a background and a context to those.” But it’s not as simple as “sharing” music. “It’s just about finding the right model to allow sharing to happen,” Larsen says. “An à la carte download model doesn’t necessarily lend itself to being the best sharing model.” The big challenge is to develop the right model. “If we can develop a model in future that works around that, then I think the integration of social music will happen a lot quicker,” he says.

Nokia’s big push is the Nokia Music Store. It wants the store to be the centre of your music library, what iTunes is to iPods.

Jake Larsen, Nokia’s head of music for Middle East and Africa, says its “goal is to bring as much music to as many people as broadly as possible”. “We felt that the time was right for South Africa,” he adds. “There has been no large-scale digital music download operation in South Africa.

“We feel we have got the potential to be the absolute market leader within South Africa because of our scale, because of the trusted Nokia brand and because of the fact that we’ve got a billion handsets around the world,” he says.

The notion is simple: you access the online platform via a PC or a music enabled Nokia device.

Music Store platform uses Windows Media DRM to manage the licences of the music you’ve bought.

With music purchased in the store, there are a minimum of three licences per track, but this number is completely dependent on the owner of the work. This allows users to, in effect, “copy” the music to three different devices. Each time a song is copied, a licence “expires”.

However, says Larsen: “We are committed to going DRM-free and we are talking to industry about going DRMfree at some point.”

It’s a tricky balance to achieve. “It’s very important to balance the rights of the user and the producer and that’s why we have the fair copy system,” he adds. But, “as soon as industry is comfortable with allowing their music to be used more freely, by all means we will.”

Larsen acknowledges there are DRM-free services in other countries. “Given that we’re in a global village, that whatever happens in another territory is known in smaller territories, it has to filter through.”

Apple’s iTunes announced in January that its catalogue of music would be DRM-free. It’s no longer a question in the US; it’s now the norm. This followed years of protracted and walking-on-eggshell-type negotiations with major record labels that had resisted the change. Apple’s Steve Jobs went so far as to write a now infamous open letter to the music industry in 2007 calling for the death of DRM. EMI ditched the practice a few months after the letter.

One thing Larsen won’t predict is the timing of the switch to DRM-free music in territo-

The PC software lets you manage your legacy music collection, all your existing MP3s, your CDs you want to digitise.

“We have in excess of five million tracks in the store, both local and international, both indie and mainstream,” says Larsen. Apple’s iTunes, while not available in this market, has over ten million songs. To move music onto your phone, simply drag and drop. Tracks are priced at R10 each while albums will set you back R100. Some local users have questioned the pricing of R10 per track on personal blogs and on social network sites like Twitter and Facebook.

Numbers in tune Nokia shipped 93.2 million phones in the fi rst quarter of the year. 14.8 million of those were sold in the Middle East and Africa. The Nokia Music Store is live in 18 countries. Nokia sold 2.6 million 5800 XpressMusic touchscreen phones in Q1. Apple, by contrast, shipped 11 million iPods worldwide during the fi rst quarter of 2009. Apple’s iTunes is live in over 50 countries, but many of these do not have the music store feature.

But younger users are already paying between R10 and R12.50 for “realtone” ringtones (30-second snippets of songs). Full-track downloads from the networks’ content stores are priced at between R10 and R20, depending on how new the music is. The Juniper study shows consumers are losing interest in paid ringtones simply because of this fact. They are “less attractive when priced at a premium to full-track downloads”.

Larsen says the Nokia ries outside of the US and UK. “I think the timing gets shorter each year,” he jokes. Why has it taken so long for a player with deep pockets to launch in South Africa? Larsen won’t answer that outright, but he says the time is now right. “South African physical sales haven’t fallen as much or as quickly as they have in other territories,” he says. “Obviously if the model is still working, there’ll be resistance to change” from the labels’ side. Larsen also mentions the fact that broadband is only really taking off in South Africa now. These factors could explain the reason no local Apple iTunes store exists.

All-in-one

Larsen says the digital music space has been developing over the past few years, and it’s “getting to the point now where models are maturing, where you’ve got big players involved taking this seriously”.

He says Nokia is getting an “increasing amount of support from local labels and from majors”.

Larsen notes Nokia has teams in each of its territories and this is one of its strengths. “Why would you run it all from a central location, trying to apply a global template to each of the operations?” he asks.

“Those guys go about sourcing all the best independent, local and locally relevant music, which complements the international deals that are done.”

He adds that one of the “greatest benefits for local artists is that once we sign them up in a particular territory, we can expose them in our other stores around the world”. Larsen makes the point (again) that Nokia is already the world’s largest manufacturer of portable music players.

The music players are “integrated into our devices, and they are connected devices rather than being standalone.

I think it’s natural that the idea of multiple devices will merge into one,” he says.

One need only look at how the digital camera, GPS, and internet browsing has been “imbibed into the mobile phone,” says Larsen. “All of that is now part of one device, and it just makes sense that you carry one device – why would music be any different?” Apple saw this threat (or opportunity) coming too. It’s worked backwards, launching the iPhone as an extension of its wildly successful range of digital music players. The music player is at the core of the iPhone’s DNA. Rumours of a smaller iPhone reinforce the fact that consumers want a single device.

Although Larsen wouldn’t admit it, Nokia’s Achilles’ heel is Apple iTunes. If (or when) Apple launches a store in this country, they’ll fairly quickly snap up a sizeable portion of the market.

Larsen says Nokia’s strength is the fact that it is mass market, while Apple is more niche. However, that hasn’t stopped Apple from selling over six billion songs through iTunes, accounting for more than 70 percent of the world’s online digital music sales.

A question mark also hangs over the business model behind Nokia’s strategy. Apple doesn’t make money from music sales through iTunes. It makes money (and a lot of it) from selling hardware. Is this Nokia’s strategy too? Nokia has launched the music store in Australia, Austria, Brazil, Finland, France, Germany, Ireland, Italy, Mexico, the Netherlands, Norway,

Poland, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, the United Arab Emirates and the United Kingdom, suggesting it will compete in both untouched markets and more developed countries. Some of these stores were launched as far back as 2007.

The big question: Will Nokia’s decision to go big in SA prove to be the right one? Has the performance of this music store measured up to the yardsticks and targets in other territories? “An emphatic yes!” says Larsen. He says the numbers back him up. What those numbers are is anyone’s guess, however. Reports suggest Nokia’s Music Store isn’t performing as well as originally expected in saturated markets like the UK.

Nokia is spending a good few million on its launch in South Africa, flooding the media with television adverts, magazine inserts, competitions and more.

“South Africa is ready for this. South Africa has been asking for a big digital music store for a long time. Now is the right time for digital music.”