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Sony BMG deal confirms potential of Nokia’s Comes With Music

by David Mercer | Apr 22, 2008

Nokia brought analysts together today to discuss the introduction of Sony BMG as the second major partner in its Comes With Music (CWM) digital music venture. Together with Universal, which was announced previously, Nokia claims this gives it access to more than 60% of the recorded music catalogue. We expect the other two majors to follow in due course. CWM is clearly an important venture for Nokia as it seeks to expand its services business and support its continued dominance of the handset market. But its significance is potentially even greater for the music industry. CWM represents a radical departure for music majors who have depended for more than a hundred years on a business model based on one-time purchase and permanent “ownership” of individual songs, tracks or compilations (albums). CWM will allow its subscribers to download an unlimited number of music tracks, and those tracks can be kept permanently (“for ever”) by the subscriber for storage on one mobile phone and one PC, whether or not the user still maintains a CWM subscription. The licence (using Windows DRM) can be transferred to a replacement phone and PC as required, although no more than two devices can be supported simultaneously. Nokia’s plan is to seed the market with CWM-enabled devices, which will be sold with one year’s subscription included in the price. Revenue from these CWM subscriptions will be shared with the music companies on a market share basis. Nokia is still determining which options to offer once the year’s subscription is finished. It would obviously prefer customers to buy a new handset, and it implies that it believes many CWM handset buyers would normally replace their devices after a year in any case. What is most significant for Sony BMG, Universal and future CWM partners is that they have accepted the removal of the traditional direct revenue relationship between permanent ownership of the individual music track or album and the end user. CWM subscribers will be able to download any and, in theory, all music ever published, and to keep those tracks for ever, but they won’t directly be funding individual pieces of music by making multiple purchase decisions. This should create quite a different mindset for consumers of recorded music, who now don’t have to worry about extra payments every time they “buy” a new track or album. They should also be able to download with the confidence that their music will always be available in a stored format, although there will doubtless be concerns that the promise of “for ever” will be broken – Sony BMG and Nokia may live to regret this bold assertion. Nevertheless, CWM will surely encourage greater consumption, ie download, of music than in any current digital or physical media model. Whether users actually find the time to listen to all the music they might be tempted to download is another question. Sony BMG’s President of Global Digital Business, Thomas Hesse, said that the CWM concept clearly resonates with consumers and should help turn the mobile phone into the music device of choice for many consumers. It clearly also helps to remove the need to buy music in the traditional way, so I hope that Sony BMG and Universal have done their sums correctly. The implication from Nokia was that if only a single-percentage share of their handset sales were CWM-enabled, this would already provide a revenue share for music companies that exceeds today’s digital music business. Beyond this “basic” revenue stream, Sony BMG’s long-term goal is that CWM will encourage the habit of acquiring new music on the mobile phone, ensuring that its share of subscription revenues continues. Time will tell whether the plan works, but this seems to be one of the more promising ventures in the rapidly evolving world of online music. Client Reading: Online Music: Global Market Forecast Add to Technorati Favorites
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