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Nokia: Keep the music, pay to burn

Reinventing the bundle?

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Analysis You could be forgiven for thinking that Nokia's music announcement yesterday was yet another subscription service. The phone giant didn't help dispel the notion by omitting some details from the official press material. However, we were able to put more flesh on the bones of the announcement last night. It's beginning to look as if Nokia's move, blessed by the world's biggest and most aggressive record company, represents a radical new direction for the music business.

Essentially, the deal bundles digital music for "free" with a Nokia phone. You can acquire unlimited songs for a year through the Nokia Music Store, then keep the music you've acquired if you don't want to continue the deal. You'll be able to play the songs on a PC (alas, not a Mac or Linux) and your Nokia.

By contrast, most music subscription services on offer today time-bomb the music, so that when you leave the service, it dies. That's fine if you think of it as a sort of "cached" on-demand radio, but not as a way of acquiring a permanent collection; it's proved unacceptable to consumers, who are used to keeping the music they've acquired for life... or until they're burgled, or the house burns down.

In other words, it's a loyalty program for Nokia customers, with music as the bait.

Instead, Nokia conceives of certain usage rights as a value-added extra - including the ability to burn CDs. The thinking is that most people who burn a CD do so for the car, and are prepared to pay. It's a risky strategy, though.

First things first: the music is now "free". At least one corner of the music business appears to have become aware that it's already competing with free unlicensed music - the wild world of Rapidshare, Torrents and blogs - that's ever improving in quality and ubiquity, and that it's unable to stamp out.

As such, the Nokia Music deal compares favourably with the phone carriers' service of choice, Omnifone's Music Station, which offers the "universal jukebox" for a subscription fee, which the network carriers may choose to absorb, or not. With Music Station, your music expires with your subscription.

It also means Universal is blessing a significant rival to its own (as yet unannounced) subscription service, TotalMusic.

One year ago, Universal agreed a controversial $1 per device royalty with Microsoft for its Zune music player. This prompted howls of outrage from anti-copyright campaigners, who claimed it was a tax on music they'd already paid for, and that the tax would distort the market and hamper innovation. Now, the world's most popular consumer electronics device manufacturer (by volume) is voluntarily absorbing the royalties. That's quite a remarkable turnaround.

We pointed out at the time that songwriters and composers might see little of the device royalty at the end of the day - despite Universal's promise to split the pool 50/50. We trust our friends at ASCAP and the MCPS-PRS Alliance will be ensuring that publishing royalties aren't overlooked.

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