Can Ovi squeeze slice out of iTunes‾

05 Sep 2007
00:00

An air of inevitability surrounds Nokia's entry into the music download business. Business 101 requires that you take the fight to your competitors in their markets, which is what Nokia has predictably done with Ovi.

A lot of ink is going to be spilled over Nokia vs. Apple. This is not going to be one of those great all-time rivalries, ÃÂ la Coke-Pepsi, IBM-Apple, Chelsea-Man U, Ali-Frazier, but it will keep many of us absorbed.

For one, each is so dominant in its respective markets that it's hard to see either of them being overtaken. Nokia sells nearly 40% of all mobile phones while Apple has some 70% of the music player market.

What makes Nokia so strong in handsets is that it attacks the market at all ends. Its huge volumes ensure it dominates the low-end and midrange. For the time being it has the smarts and the R&D budget to be the biggest player in the top-end as well.

At least till now. The iPhone challenge comes not just from the product but the excitement that it creates in the market. Nokia has a billion or so customers, but none has ever queued up for 12 hours to buy a new model.

The devices-music download business appeals to Nokia in the same way handsets are attractive to Apple.

It is right to offer a range of formats, unlike iTunes. But, just as iTunes tracks are iPod-exclusive, Ovi downloads will play only on Nokia phones. That will drive the download-device combo, but is hardly creates differentiation. And, more than anything else, it confirms that this won't be anything more than a nice earner for Nokia.

Uneasy relationship

That's assuming that the devices are attractive as music players. It also assumes that the collective wrath of the operators doesn't spike Nokia's plans. Mobile carriers that are hoping to make a business out of selling multi-megabit downloads from their HSPA networks will now see a lot of their business disappear from users 'side-loading' after downloading from their PCs.
It's hardly surprising that, as Nokia launched Ovi last month, Orange UK leaked a nasty memo warning that it would not cooperate with the handset firm on music downloads.

Nokia has long had an uneasy relationship with operators. At a time when carriers are falling over each other to sell the iPhone, Nokia has given them one more reason to help Apple.

Steve Jobs has at least been obliging enough to lock the phone onto the operator's own network. It's hard to imagine Nokia doing the same.

Turning back to Apple, the device company it most resembles is RIM, the Canadian firm behind BlackBerry, and not just because of its obsessive users. In fact, the creation of an enraptured user community is what enables both firms to be able to command a share of the service revenue.

The pulling power of the iPhone alone has forced hard-pressed operators to share the take. Apple doesn't say how big a slice it gets from AT&T. However, the Financial Times reports that it is hitting up T-Mobile in Germany, Orange in France and O2 in the UK for 10% of the action.

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