Feeds

Nokia decks execs as it counts cost of free music

Doing a Hoover?

Gartner critical capabilities for enterprise endpoint backup

Exclusive Nokia faces a crippling financial bill for its strategy of bundling free music with handsets, which will give users unlimited song downloads with Nokia phones.

The world's biggest label, Universal Music, joined the "Comes With Music" initiative at launch last December, and Sony BMG joined last week. The Register has learned that Nokia must pay the wholesale per-unit rate for downloads over a certain ceiling - believed to be 35 songs per user per month.

Two key executives have paid the price, The Register understands. Ed Averdieck, formerly Managing Director of Nokia Music (and former MD of OD2, which Nokia acquired in 2006) left the company earlier this year. The other joint head of Nokia Music at the time CwM was announced, former shooting star Tommi Mustonen, former head of Nokia Multimedia, has been given a "punishment that fits the crime", insiders say: he has to negotiate the label deals personally.

"It will cost Nokia a fortune - it's a reckless business move," an insider and supporter of the concept told us.

While bloggers beat up Nokia for CwM because it used DRM - shrewder heads appreciated the concept as a potentially market-changing innovation. CwM is a loyalty program that offers users a "universal jukebox" - an attractive alternative to free unlicensed P2P - and gives Nokia a strong differentator to market leader Apple.

But the devil's in the detail, and the major record companies are wily negotiators. While we understand that the per-handset royalty floor to Universal is only a third of the figures quoted recently (see Nokia's Comes With Music Comes Without Profits) Nokia is left with a crippling liability, which punishes it for the very user behaviour it's trying to encourage.

In its haste to compete with Apple, Nokia failed to study consumption patterns - leaving it footing the bill as users download freely.

Echoes of Hoover

With Nokia determined to sign every record label for the program - large or small - a similar marketing promotion that went horribly wrong will be remembered.

In 1992, Hoover promised buyers free flights with the promotion "Two return seats: unbelievable", and was inundated with the response. It resulted in six years of litigation, cost tens of millions of pounds and senior executives their jobs. The parent company eventually offloaded the British division to a foreign buyer.

"Hoover were slow to realise just how much trouble they were in and soon set about making matters worse for themselves," the BBC dryly notes.

Nokia continues to pursue the other two major labels - EMI and Warner Music, and the independent sector.®

Bootnote: You can watch the keynote presentation "Free: the Past and Future of a Radical Price" to Nokia World 2007 by WiReD magazine editor-in-chief Chris Anderson here. Nokia unveiled CwM a month later.

Secure remote control for conventional and virtual desktops

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
So, Apple won't sell cheap kit? Prepare the iOS garden wall WRECKING BALL
It can throw the low cost race if it looks to the cloud
EE accused of silencing customer gripes on social media pages
Hello. HELLO. Can EVERYTHING EVERYWHERE HEAR ME?!
Time Warner Cable customers SQUEAL as US network goes offline
A rude awakening: North Americans greeted with outage drama
Shoot-em-up: Sony Online Entertainment hit by 'large scale DDoS attack'
Games disrupted as firm struggles to control network
BT customers face broadband and landline price hikes
Poor punters won't be affected, telecoms giant claims
Netflix swallows yet another bitter pill, inks peering deal with TWC
Net neutrality crusader once again pays up for priority access
prev story

Whitepapers

Best practices for enterprise data
Discussing how technology providers have innovated in order to solve new challenges, creating a new framework for enterprise data.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Advanced data protection for your virtualized environments
Find a natural fit for optimizing protection for the often resource-constrained data protection process found in virtual environments.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?