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Nokia Aims to Dominate Multimedia Market

Wed, 02/28/2007 - 10:31pm
Brad Smith

AMSTERDAM– Nokia executive Anssi Vanjoki has stopped referring to the handsets he works with as mobile phones and now calls them computing devices instead. Sure, they make phone calls, but they do a lot of other things as well. They're cameras, video camcorders, music players and enterprise productivity devices.

Nokia already is the world's largest digital camera manufacturer, selling 100 million cameraphones in 2004. And Vanjoki's boss, Nokia CEO Jorma Ollila, said in a press conference here last month that the Finnish company expects to be the largest manufacturer of MP3-enabled devices this year, with 40 million sold. Ollila also said Nokia expects to double the sales of its smartphones in 2005, to 25 million.

Many of these devices will use Nokia's Series 60 smartphone operating system, which targets the high end of the market. Nokia executives say it has filled a gap in mid-range phones, which some analysts criticized the manufacturer for last year, and the company now wants to own the market for the more powerful handsets.

It remains to be seen how attractive these devices will be to consumers and business users. A recent survey by In-Stat, a sister company to Wireless Week, said early adopters were lukewarm about handsets offering music or broadcast TV. The survey said only 9 percent of the early adopter consumers were very or extremely likely to buy a cell phone with MP3 or other music capabilities, while fewer than 11 percent were very or extremely interested in broadcast TV.

High-end Approach Nokia's Nseries of devices, which it will start selling later this year, falls into the high-end, holistic device approach. All are W-CDMA handsets with GSM/GPRS/ EDGE. One of the handsets, the N90, has a 2-megapixel camera, VHS quality video and Carl Zeiss lens. The N91, with its 4-gigabyte hard drive, is a music player phone capable of holding 3,000 songs. The N70 comes close to being a "do-everything" device with a 2-megapixel camera, push e-mail, FM radio, music player and HTML browser.

The N90 will come out in Europe in the second quarter, followed by a U.S. launch in July or August. The N70 is targeted for a third-quarter launch and the N91 in the fourth quarter. Pricing is expected to be about $900 before carrier discounts.

Vanjoki, executive vice president and general manager of Nokia's multimedia division, says the manufacturer wants consumers to recognize the Nseries as the brand that offers the best multimedia devices available, often optimized for a specific application like music or video.

The N91 is probably the most interesting of the three Nseries devices partly because of its large hard drive and partly because it embodies both a carrier strategy and a digital music strategy. The device also will have Wi-Fi connectivity, Bluetooth and USB 2.0.

The handset already is being compared with Motorola's iTunes phone, the handset developed for Apple's iTunes downloading service. The iTunes phone originally was going to be introduced at the CeBIT electronics show in March but was delayed until sometime this summer. Some industry insiders speculate the delay was caused either by carrier concern that it might be left out of iTunes music sales, or that Apple didn't want the phone shown until closer to actual retail launch. A Motorola spokeswoman said the decision didn't reflect a disagreement with carriers.

Nokia's Vanjoki says the Finnish manufacturer developed its N91 music phone in collaboration with carriers. The handset is designed to let carriers create their own music strategy, including having a branded music store for subscribers to use.

Nokia partnered with Loudeye, a Seattle-based company with a digital music platform using Microsoft Windows Media. Loudeye and Nokia already have paired up to offer a music download service to O2 Germany. The service started this spring with 230,000 tracks that can be downloaded to mobile devices. Digital rights management (DRM) is handled under the Open Mobile Alliance's DRM specification. Songs can be downloaded to handsets or to a PC for later synchronization with the phone. There also is a music recognition service that identifies songs played on a handset.

Jonas Geust, vice president of Nokia's music business program, says one of the key capabilities of 3G networks is the ability to download full songs onto a phone. Nokia's strategy involves enabling mobile subscribers to access their music when, where and how they want, he says, adding that the N91 is a "connected mobile jukebox" that supports most popular digital music formats.

The N91 will launch with a mobile delivery platform that Loudeye and Nokia are developing, Vanjoki says. Mobile operators will be able to set up their own music stores for subscribers.

The Nokia-Loudeye platform can come with a huge music catalog, a carrier can develop its own catalog, or it can be used by other content providers. Vanjoki says the platform even could be used by Apple to mobilize iTunes.

"If Apple wants to develop a program for the N91, they can have the APIs [application programming interfaces]," he says. But Nokia will not become a content provider itself, only an enabler for others, he adds.

Cost Concerns? Vanjoki also says the OMA DRM implementation won't impede mobile music downloads. There had been reports out of Europe earlier this year that the way the standard was being implemented might result in a license fee of as much as $1 for each handset, which many carriers found onerous. But Vanjoki says the implementation was not as rigid as originally thought, with fees negotiated. He insists everyone involved realizes that high fees could adversely affect the uptake of mobile music.

Vanjoki also says that despite the higher price tag, there is a sizable market – even if only 1 percent of the world's 2 billion mobile subscribers purchased one, it would still be 20 million devices. Lending credence to his speculation is an estimate by Strategy Analytics that 430 million cell phones will be have been sold by 2008 that will be capable of storing and playing songs. Apple, meanwhile, has sold about 10 million iPods.

Voice always will be the main application for a mobile phone, but there are many more things people want to do while they are moving around, Vanjoki says. The Nseries will connect people to other people, but also to information and entertainment.

Carrier pricing for music downloads is still an open question. Some Asian carriers are offering downloads for a flat monthly fee. Some analysts think carriers might follow the Apple iTunes model, selling the songs at 99 cents each. So far, Apple has sold more than 300 million songs off the iTunes site, giving carriers cause to believe they could find a sizeable new revenue stream.

That business model ultimately could determine how well mobile music is enjoyed by consumers.

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